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South African housing market 2022

Will house prices go up or down?

By Angelique Ruzicka

, |

South African housing market 2022

Will house prices go up or down?

By Angelique Ruzicka

, |

3 min read

Record low interest rates have given people the confidence to invest in property. According to data from BetterBond, 70% of its homebuyer applications consisted of first-time buyers over the last 18 months.

But what will 2022 have in store? Will we see interest rates rise? Will it be a buyer or seller’s market?

Bigger bonds

Lower interest rates are making people comfortable about taking on more debt. ‘Our home loan submissions for October 2021 show a significant jump in the average bond size from the three- month average of R1.2 million in July to just over R1.3m in October.

‘This suggests that, with the lower interest rates, people can afford larger bonds and indicates the shift in house needs, and people opting to buy larger properties, or homes with gardens or access to amenities. Often, these are homes in lifestyle estates that offer plenty of green spaces and lifestyle activities,’ explains Carl Coetzee, CEO of BetterBond.

Will low rates last?

The Reserve Bank’s Monetary Policy Committee will meet this month for the last time this year. There is speculation that there will be an increase in the repo rate. But the impact could be nominal.

Coetzee says: “Even if it decides on a nominal increase in the repo rate, the prime lending rate will still be well below double digits for a few months yet. We are confident that this favourable lending environment, coupled with the return to lockdown level one, which allows more economic activity, will continue to boost the property market so that it continues the growth trajectory we have seen this year.

But this momentum is expected to cool down further into 2022. ‘Evidence shows that volumes are now moderating. For 2022, we expect that interest rates will play less of a stimulative role on market volumes.

‘Nevertheless, pandemic-related shifts in demand should remain in the system (driven by work-from-home, home-schooling etc.), and we have seen this supporting demand for bigger properties. On balance, however, we expect volumes to trend lower, especially because the labour market has been rather slow to re-adjust,’ says FNB senior economist Siphamandla Mkhwanazi.

Buyer or seller’s market?

Both FNB and BetterBond concur that 2022 will be a buyer’s market. But what does this mean? A buyer’s market means that buyers will have more negotiating power than sellers.

This is typically because there’s an oversupply of homes on the market. Greater choice means buyers have the luxury of taking their time. This especially puts first time buyers in a good position.

Best and worst performers by location

BetterBond says it is seeing a renewed interest in the Western Cape and, as a result, prices in this region are starting to increase.

Coetzee adds: ‘According to Lightstone figures at the end of August, house price inflation in the Western Cape was at 6%. Other top performers include the Eastern Cape, Free State and North West.

‘This corresponds with BetterBond’s application data for the 12 months ending in September which shows that the average house purchase price has increased by 8.2% in the Eastern Cape, by 7.5% in the Free State and by 6.3% in the North West.’

Expect coastal based homes to do better than inland ones in 2022. ‘Coastal properties recorded a house price inflation of over 8.5% in May, according to Lightstone, compared with the 5.7% of their non-coastal counterparts.

‘So, we expect cities that offer coastal properties to do well. Ethekwini and Nelson Mandela Bay have shown considerable growth in recent months, and we expect this to continue,’ says Coetzee.

Zoom towns

Remote working is set to continue which will mean more buyers putting quality of life first. ‘Mossel Bay, for example, has become increasingly popular with families as it offers a village lifestyle as well as a choice of schools and excellent amenities.

‘Durban’s north coast is attracting many buyers from Gauteng. We will continue to see a demand for these so-called “zoom towns” – coastal or country towns where people can work remotely but are still close enough to travel to the city or an office if they must,’ says Coetzee.

Expensive estates?

Well maintained security estates will continue to be popular. ‘In KZN, the recent unrest alarmed many suburban residents and there has been a change in priorities for those looking to purchase property, especially for those nearing retirement age.

‘Excellent security is paramount, so well-managed up-market gated estates have seen strong interest. We don’t see this trend abating, especially with 50-somthings looking for opportunities to work from home as they ease into semi-retirement. We would expect prices to increase with the increase in demand,’ says Phil Barker a consultant at Renishaw Property Developments.

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