The property market in 2022 saw the fall of the first-time home buyer, the impact of rate hikes on property demand, and the ongoing resilience of the luxury home market, says Grant Smee, managing director of Only Realty Property Group.
And these trends will undoubtedly have a big influence on those that will shape the property market this year.
These are some of the key trends expected this year:
– Buyer’s vs seller’s market
An ongoing topic of debate is whether 2023 will be a buyer’s or seller’s market, Smee says.
“However, when analysing the data, it’s clear that this sentiment varies across different pockets of South Africa.”
Despite falling house prices in the Western Cape, the region remains a sellers’ market, while high demand for properties in parts of Gauteng will also see these areas transitioning into a sellers’ market, he states.
“For 2023, we predict that majority of the country will remain a buyer’s market, barring pockets of excellence.”
– Luxury properties will lead the way
The luxury property market remains resilient in times of interest rate hikes and this trend is set to gain momentum in 2023, Smee adds.
“Unrestricted business and leisure activity resumed in 2022, and 2023 is expected to be a big year for luxury property investment by foreign buyers. The demand is largely driven by the value of the rand and the global energy crisis. The Western Cape remains the most sought-after region for international investors in the luxury property realm.”
Echoing this, Samuel Seeff, chairman of the Seeff Property Group says there has already been a notable uptick in sales above the R10 million to R15 million mark for the first time since 2017 in the Cape.
“Prices are likely to hold firmly and may even push up. If there is a level of semigration to the KwaZulu-Natal North Coast and certain Eastern Cape areas, we may also see it play out positively in terms of prices.
– Aspiring buyers will choose to rent
While the past few years saw a sharp uptick in first-time homebuyers due to the lower interest rates, ooba chief executive Rhys Dyer, says 2022 showcased just how “rates-sensitive” this demographic truly is, with the number of first-time buyers steadily declining, and those that are buying, opting to purchase properties that fit their affordability constraints.
In 2023, he anticipates a continued steady decline in first-time homebuyers as many opt to rent rather than buy.
“However, data indicates that Gen Z’s – the next generation of South Africa’s workforce – believes in the power of home ownership, so we expect to see increased uptake in the next few years.”
Smee says home buying as a traditional ‘right of passage’ has changed over the years, and today, would-be buyers are opting for flexibility over the responsibilities associated with owning a home.
“International data shows than one in four millennials say that they will forever be renters.”
As first-time home buyers are rates-sensitive, the current climate doesn’t favour home buying in this bracket.
“However, as the rates increases start to subside and the next generation (Gen Z) enters the world of work, it’s believed that there will be a sharp revert to homeownership,” he notes.
– Demand for new developments will soar
Last year saw high demand for homes in new developments, largely driven by lower costs, community living and luxurious amenities, Smee says.
“However, the risk of saturation in certain areas cannot be denied as many developers scramble to sell homes. New developments generally attract first-time homebuyers and investors. Having excess stock in certain areas could mean that developers and owners sell for less, devaluing the price of properties in the area.”
New residential developments (also known as off-plan properties) have experienced a notable surge in popularity among South African homebuyers, and this trend is set to accelerate for the foreseeable future, agrees Dyer.
ooba’s data indicates a 117% increase in approved home loans for new developments year-on-year.
“This is largely driven by affordability. The homebuyer pays zero transfer fees and bond repayments are delayed until construction is complete.”
In addition, property developers are driving this trend.
“Developers are paying close attention to the needs of the homebuyer and are catering to these through new and exciting developments. Buyers are spoilt for choice and are opting for lock-up-and-go, secure living through off-plan properties,” Dyer says.
– Semigration
As daily life returns to normal following the Covid-19 pandemic, Smee says many South Africans are heading back to their traditional ‘9 to 5’ in the city.
“In 2023, we expect most of the country to return to pre-pandemic lifestyles. However, many companies have decided to forgo the traditional 9-to-5 and have implemented ongoing hybrid or work-from-home policies.
“Based on this, semigration will continue to be a trend, with much of the activity taking place in areas that are more affordable but still offer a great quality of life,” he says.
Sought-after areas will include George, Paarl, Mossel Bay and the Northern suburbs of the Western Cape.
Seeff believes the strongest market is likely to be the Western Cape, boosted by semigration and a return of international buyers.
“We may even see more Europeans looking to invest here given the challenges in their own economies.”
Other inland areas, he says, do not benefit from the added demand from semigration and international buyers and are likely to see lower turnover and pressure on asking prices.
“Those looking to semigrate from up north may potentially need to sell at a discount.”
Emigration and semigration are still impacting many decisions to move, with Andrea Tucker, director of MortgageMe, explaining that South Africans are either leaving the country or moving to the coast, mostly from Gauteng to the Western Cape.
“This has resulted in many more properties coming onto the market, and supply-demand economics coming into play as a consequence.”
ooba’s latest statistics indicate that while Western Cape remains a strong contender in the property realm, and, while prices have been slowing the most rapidly, average purchase price remains the highest among the major regions.
“The appeal of the Western Cape clearly does not lie in the relative affordability of homes but rather in the lifestyle offering, the relative security, and the competency of municipal management,” Dyer says.
In contrast, he says the likes of Gauteng South & East Rand have seen an increase in the rise of property prices, despite registering the lowest average purchase prices in South Africa.
“Interestingly, Gauteng South & East Rand is the only major region in which applications from first-time buyers remains consistently above 50%.
“We anticipate that the demand for areas such as these will grow in 2023 as buyers plan carefully and realise their dream of homeownership by purchasing in areas where they can manage affordability.”
He adds: “We expect various small towns to continue to feature prominently in our home loan data in 2023.”
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