The housing market is cooling, but sales are still doing better than expected, agents say

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* This article first appeared in Property360 digital magazine

While the housing market in South Africa may cool, activity levels are still exceeding expectations as both aspiring and current property owners seek to step on or climb the property ladder.

Low interest rates continue to drive activity, but property prices are cooling, meaning buying levels are also falling. Adrian Goslett, Regional Director and Chief Executive of Re / Max of Southern Africa, says Q3 2020 was understandably an unprecedented time Record-low interest rates and the need to catch up after the lengthy closure of the deeds office drove sales to an all-time high.

“But what was not to be expected was that this phase of hyperactivity would last so long. It’s now a full year later and we’re still seeing record-breaking sales. “

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Citing Lightstone data, he says there were more than 44,000 bond registrations in the Deeds Office from July through last month, with data from the Re / Max National Housing Report showing this was 9% higher than the previous quarter.

“In addition to an increase in the number of transactions, house prices also rose steadily in the third quarter of this year.” Kobus Lamprecht from Rode & Associates says in the latest Rode report that the real estate market “continues to cool” from April.

However, from January to last month, house prices rose 4.3% year over year – in line with consumer inflation.

“The strong house prices last year were due to record-low interest rates that suddenly made homes more affordable for marginal buyers and led some tenants to move from renting to owning.

“Young and first-time buyers have bought real estate in large numbers. “The recent slowdown in house price growth suggests that rate-driven demand is likely to have peaked.”

Lamprecht also notes that the slowdown in house prices is “no surprise” given the record high unemployment, and says that while the economy is recovering, it has not yet reached pre-pandemic levels.

“It probably won’t do this until 2022 or 2023 due to the scale of the damage caused by the virus and government policies over many years. The effects of the third wave restrictions and the unrest in July were further setbacks. “

In addition, the prospect of rising local interest rates in 2022/23 does not bode well for real estate prices in the medium term, he says.

In fact, one could argue that the global interest rate rally has already started with South Korea hike rates in August, the first developed country to do so in the era of the pandemic, while Brazil (an emerging market like South Africa) did the same Interest rates increased in August and September. Both countries cited higher inflation as a concern.

“In the US, we expect the Federal Reserve Bank to start raising interest rates in late 2022 or 2023 as well. This means that the beginning of the upward interest rate cycle in South Africa cannot be far. ”

Goslett says house price appreciation is heavily tied to the rules of supply and demand. “With high buyer activity, sellers tend to achieve higher asking prices. This then leads to a stronger appreciation of house prices until demand levels off. ”

The nationwide average price for condominiums is R1.352 million, an increase of 2% from the second quarter of 2021 and an increase of 21% from the third quarter of 2020.

Lightstone data shows that the average annual price change (for the year to date) is 6% for section titles and 12% for condominiums.

When analyzing the buying activity in the various price ranges, the Re / Max report shows that the sale of properties with a price between R800,000 and R1.5 million continues to make up the largest share of all transfers in the third quarter of 2021 with 26.7% .

This is followed by transfers between R400,000 and R800,000 with 23.1% of the total transfers. According to Siphamandla Mkhwanazi, senior economist at FNB, the real estate agent survey also shows in the third quarter of 2021 that market activity is decreasing and slowing in most price segments and regions.

At KZN, however, the decline was more noticeable, probably as a result of the July unrest. “In line with the weaker market activity, the sentiment of real estate agents – as measured by the proportion of agents who are satisfied with the prevailing market conditions – declined in most price segments and regions.

“Still, the indicator remains optimistic, particularly in the Western Cape, presumably in line with activity still above pre-pandemic levels and the expectation that the unrest in KZN would benefit the Western Cape.

“The decline was more noticeable at KZN: 51% were satisfied with the prevailing market conditions, compared with 72% in the previous quarter and the national average of 74% in the third quarter of 2021.”

He adds that properties are taking longer to sell nationally and the average time in the market has increased for the first time in a year. This is yet another sign of a slowdown in home buying.

“The reason for the sales matrix remained largely unchanged from the previous quarter and shows that sales are still increased due to financial pressure.”


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