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South African Housing Market Shifts in Favour of Buyers: Opportunities and Challenges

Published

10 months ago

June 28, 2023

South African Housing Market Shifts in Favour of Buyers

The South African housing market is currently favouring buyers in many areas due to the stagnant economy and higher interest rates that have decreased the number of buyers. Transactions are taking longer to conclude, and stock is increasing in certain regions, such as Gauteng and the inland areas, as reported by Samuel Seeff, chairman of the Seeff Property Group. Though there is no distress in the market, there has been a rise in people selling for financial reasons, which make up approximately 17% of all sales. Semigration is becoming popular, as roughly 14% of sellers aim to move to the Cape or areas providing better services and amenities.

According to Seeff, two elements favour buyers in today’s market. The first is the ongoing favourable mortgage lending conditions, as the current price of 11.75% is still below the 15%-16% average despite it increasing over the last two years. Bank data indicates that buyers are still receiving high loan-to-value mortgages, with first-time buyers still being able to secure 100% bonds. Moreover, qualifying buyers can slightly benefit from a better interest rate as banks continue competing for business in the home loans market.

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Another motivator for buyers is flat price growth. Average property price growth has continuously fallen over the last 18 months and now sits at 2.7%. A year ago, growth averaged around 4%, and even during the high-demand period of the Covid property boom, growth only reached 6% on average. Comparatively, global markets experienced runaway price growth of 20%-30%. Outside of greater Cape Town, where double-digit house price growth was last reported in 2007 by the FNB House Price Index, price growth has remained stagnant for a decade. Buyers can find properties at a lower price compared to stronger periods of growth, which adds value to areas like Gauteng and other inland provinces. Considering prices above R208m, the super-luxury market also provides buyers with good value.

Due to the increased interest rate, there are fewer buyers in the current market compared to the last two years, resulting in the demand-supply curve shifting towards supply in several areas. We now see higher stock volumes and a lengthening time-on-market, where sellers’ asking prices are under pressure.

Buyers should factor in the higher interest rate when budgeting, though the weak market offers a chance to purchase properties at flat prices and potentially negotiate a better deal. On the other hand, sellers need to ensure that their property is in great shape and offers significant value to attract a good offer since buyers can afford to choose and be picky.

Source: Buy now if looking for houses

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