Residential price growth has been weak in South Africa since hitting highs in 2007, Mark Otto, CEO of MO Property Group, an estate agency, said on Friday. He said middle class starter homeowners had seen very little price growth if any.
“For example, we are currently marketing 15A 8th Avenue in Melville, Johannesburg, where we have the sole and exclusive mandate. The current asking price is R1.9m the same purchase price that the seller paid in 2014, 8 years ago. This is a massive indicator that the South African residential property landscape has achieved limited and constrained growth in the past eight to ten years.
“In fact, besides a minor peak in 2015, the market has basically flatlined with little or no growth in the past ten to 15 years since the highs of 2007,” said Otto.
Around 75% of residential deals in SA in 2022 and 2021 have been under the sellers asking price, according to interviews with agents. MO Property’s best deal in 2022 was the sale of 9A Murray Street in Waverley, Johannesburg. The seller had been asking R5.5m but it sold for R5.3m.
“Agencies have found that many of their deals across 2022 have been under the initial asking price. Consumers really are under pressure with such extreme rises in living costs. I believe the biggest challenge the real estate industry is currently facing is rising inflation which is currently sitting at 6.5% up 0.6% from its levels in May 2022 which has led to a rise in interest rates,” he said.
“Semi-migration, another fallout helped by the Covid-19 pandemic, has seen an increasing number of people migrate from the inland cities to the smaller coastal towns in South Africa, as they look to work remotely and not in offices,” he said.
The Eastern Cape has actually been the leading province in South Africa in terms of real house price growth post Covid-19, experiencing unprecedented levels of growth of 8% year on year.
Meanwhile, the residential rental market has been battered and bruised by firstly the low interest rates during the pandemic which fuelled the first-time buyer’s market and led to a decrease in demand for rentals. This has been combined with travel restrictions and various lockdowns.
“The residential rental market did not experience the same kind of demand or churn it usually does with the corporations not recruiting overseas employees to South Africa on contractual work due to the strict nature of travel restrictions,” he said.