Buyers want homes that have easier access to the great outdoors, more space, and play areas for children. Picture: Caleb Oquendo/Pexels
Shifts in human behaviour across the globe and changing lifestyles and work patterns are creating massive waves in property markets everywhere, states Andrea Tucker, director of MortgageMe.
And in South Africa specifically, more dynamic work/home models that are the legacy of the coronavirus have resulted in a buyer’s market for residential properties.
“Although interest rates that dropped significantly during lockdown have increased repeatedly over the last 12 months...the home buying market remains largely buoyant across the entry-level/affordable segment, mid-price range as well as the luxury home sector.”
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Further good news, says Grant Smee, managing director of Only Realty Property Group, is that, despite economic uncertainty, banks continue to lend favourably and low house price inflation makes homes buying more affordable.
“And for these reasons, the outlook for 2023 is pretty decent for the South African property market.”
Despite the challenges of external factors such as ongoing interest rate hikes and rising costs of living, Rhys Dyer, chief executive of ooba Group, says the ongoing demand for home loans remained relatively stable in 2022. He attributes the sustained demand to the fact that the increasing interest rates over the year, culminating in a prime rate at year end of 10.5%, remains well below the long-term average rate over the past 25-years. Also, banks continue to compete for home loan business by approving loans on attractive terms – both in terms of interest rate and in the granting of 100% loans.
While the interest rate hikes mean that home loans will cost more and the buying market will be a little thinner, Samuel Seeff, chairman of the Seeff Property Group says there is still plenty of positivity for the market into next year.
Qualified buyers will likely have their pick of properties in 2023, says Tony Clarke, managing director of the Rawson Property Group, with preferences for smaller, more affordable properties.
“Going into an election year, we’re also expecting a few surprises. In the long run, however, we’re fully confident that the property market will come up swinging on the other side.”
Properties that will be in demand
Outside of the movement in the markets of major cities including Durban, Cape Town and Johannesburg, Tucker says there is also an increase in relocation to peri-urban and semi-rural areas.
“With remote working being increasingly acceptable and digital natives connecting from anywhere, greener suburbs are sought-after areas. Easier access to the great outdoors, more space and play areas for children, walking and cycling routes are all part of buyers’ specs, as well as, in some cases, off-the-grid installations such as solar power and grey water collection.
“Now is clearly a good time to be looking for property with the wide range of stock in all price segments on estate agents’ books. A competitive lending environment is contributing to the current movement in real estate and making this largely a buyer’s market.”
Buyers must be cautious, sellers must be realistic
In the current difficult economic climate in which we – and the rest of the world – find ourselves though, Tucker says buyers must be careful not to over-extend their budgets by purchasing a property outside of their affordability range.
“Even a percentage increase in interest rates can adjust bond repayments significantly, and with the burden of higher costs of living on everyone, caution in jumping into a new house purchase is advised.
She says Fitch Ratings forecast South Africa’s headline inflation to remain above the South African Reserve Bank’s (SARB) target range until late-2023.
“As the country’s inflation rate is expected to remain high, questions remain about whether the SARB will raise its policy rates again or take a pause, with Fitch suggesting that South Africa’s interest rates could be increased well into 2023 to cool rising inflation.”
She adds: “Investing in bricks and mortar if done wisely, is generally a sound decision with a long-term lens. With the correct advice from lenders and real estate agents, buyers can find, if not a bargain, then a great opportunity for economic security and future wealth.”
Echoing this, Samuel Seeff, chairman of the Seeff Property Group, says the property market remains good for buyers, although they will need to factor in higher repayments and potentially higher deposit requirements on home loans.
“The bank lending landscape remains a positive for the market and there are still ample reasons to invest in your own home.”
With fewer buyers in the market and the likelihood that they will look for more negotiability, he says realistic pricing will be a prerequisite to conclude a sale.
“As there are no foreseeable prospects of higher prices going into next year, serious sellers should not waste the opportunity of a serious offer.”
Buy-to-let
Dyer says investment properties will continue to gain ground in 2023.
“Demand for the financing of buy-to-let properties has grown by around 30% year-on-year and this trend is particularly notable in the Western Cape where the rate of applications for investment properties reached a high of 24.2% in October 2022.”
Investors are looking to ‘cash in’ on high demand in the rental market due to higher interest rates, and this trend is set to continue well into 2023, he adds.
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