December 5 2022
SA’s estate agencies are optimistic about the housing market in 2023.
While 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 said there was still plenty of positivity for the market into next year.
The South African market has remained healthy and generally outperformed world markets over the last few months, he said.
“While SA follows world patterns, we have not experienced the dramatic highs and lows and consequent shocks that we are seeing in other markets,” said Seeff.
Property price appreciation has remained well below the global highs of 30% to 40% which means that we are not likely to see the dramatic price adjustments that those markets are now experiencing, according to Seeff.
SA’s interest rates, while slightly above the pre-pandemic level, are still below the 20-year average. Comparatively, US rates have trebled, resulting in house payments doubling and tripling in some instances. The US is expecting the worst property year since the Great Depression.
Seeff said that following the post-Covid 19 market and first-time buyer boom of 2021 and early part of 2022, there has been a market correction resulting from the normalisation of interest rates.
Andrew Golding, CEO of Pam Golding Properties (PGP), said residential real estate had very strong fundamentals in SA.
“Despite hopefully being near the peak of the interest rate hiking cycle, South Africa’s residential property market remains supported by underlying fundamentals, most notably the fact that overall demand continues to exceed supply. This is perhaps particularly evident in the Western Cape, which is characterised by high demand and stock shortages, while Johannesburg has stock available with less demand, yet both markets function and demonstrate ongoing resilience,” said Golding.
“Bearing in mind that while the interest rates have recently been at historic 50-year lows and are now just above pre-Covid levels, it is hoped that we are reaching the end of the increases, as the interest rate environment is understandably the single biggest influencing factor in the market,” he said.
Seff said he expected SA’s residential market to head into 2023 on a fairly solid footing but with several sub-plots due to area and price band differences. 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,” he said.
“We have already seen a notable uptick in sales above the R10m to R15m 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 KZN North Coast and certain Eastern Cape areas, we may also see it play out positively in terms of prices,” said Seeff.
The lower price bands and first-time buyers have been most affected by the rate hikes. The market above R3m is less sensitive to rate hikes, but more to economic conditions and business confidence.
The rental market has largely recovered from the pandemic with drastically improved payment trends and positive growth in rental rates. Semigration and a return of tourism have also boosted rental demand with some areas now reporting stock shortages, providing buy-to-let investment opportunities, according to Seeff.