Strong growth in the residential building sector over the next 12 months means that that home affordability is also all set to increase.
According to FNB household and property strategist John Loos, the square meterage of residential building plans passed showed year-on-year growth of 19,2% in the third quarter of last year and the square meterage of residential building completions is expected to surge this year by 21,6%.
And this, he says, is likely to be the highlight of the real estate year, as a substantial amount of new stock coming to the market will help to meet the huge demand that has been pent-up over the past few years, and thus keep house prices from rising too fast.
Meanwhile, we believe that falling food and fuel prices – and decreasing inflation – will improve the financial situation of many households in the coming 12 months and that this will also help to make property more affordable for many, even if the Reserve Bank continues to raise interest rates and salary increases are not stellar.
Of course, some areas are still likely to see the bidding wars, cash purchasing and lofty asking prices we have seen emerge in recent months, but many more will soon have enough affordable stock available to enable ordinary families to get back into the market in a meaningful way.
What is more, as prices stabilise, we expect a lot more sellers to moderate their own expectations instead of holding out for unrealistic prices, and that this will give the market even more momentum.
And finally, we think it is going to get a little easier to obtain home loan approvals. By no means are we expecting the mortgage free-for-all of the last real estate boom, but we do think that the banks will look more kindly now on those who have taken the trouble to clean up their credit issues over the past few years, and that deposit percentages could well decline.
This article “Buying A Home Might Be Easier In 2015” was issued by FNB SA.