The local property market is experiencing varying levels of demand as consumers battle against rising interest rates, ongoing loadshedding issues, and pressured affordability levels. Markets that attract cash buyers remain in steady demand while other markets have begun to shift towards a buyer’s market.
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Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, explains that – for those who can afford it – now is a great time to enter the property market. “Depending on the province, the scales of demand and supply are slowly starting to tip towards buyers’ favour,” says Goslett.
Speaking into a province where demand is still high, Kevin Jacobs, Broker/Owner of RE/MAX Premier, explains that “the Southern Suburbs and South Peninsula of Cape Town continue to experience high demand for properties. Correctly priced properties are selling within a matter of weeks, and in some cases, days of being listed. While demand from local buyers has stabilized, there has been an increase in demand from up-country and foreign buyers,” he explains.
“Our stats show that currently, around 50% of buyers are cash buyers, with the other 50% split between those subject to the sale of a property and those seeking bond finance. Those whose offers are subject to the sale of a property up-country have been negatively impacted by market conditions in those areas. These properties tend to be taking longer to sell and are being sold at less than originally anticipated by the prospective buyers in our area. Nonetheless, very few sales are falling through due to this, and buyer enquiries remain high,” says Jacobs.
Speaking into the market conditions up-country, Nadia Aucamp, Broker/Manager of RE/MAX All Stars, explains that there has been a shift in demand following the recent interest rate hikes. “Previously, the demand for homes in the Alberton, Germiston and Johannesburg South areas was extremely high and this lead to a limited number of homes available for sale. Following the interest rate hikes, there has been an increase in available properties with a reduced number of qualifying buyers,” she notes.
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There has also been an increase in sellers facing affordability issues. “Purchasers took full advantage of the record low interest rates after the pandemic and acquired properties at the maximum of what they could afford. Sadly, we are now seeing an increase in the number of people who have to downscale or rent in order to maintain a healthy credit record. Unfortunately, the increasing interest rate coupled with increasing municipal rates and taxes and a higher cost of living in general has made it difficult for some buyers to continue to afford their properties,” says Aucamp.
Overall, she explains that sellers in her areas are not getting the arguably exorbitant prices of two years ago. “The market has stabilized and prices are lower than they were when interest rates were at their lowest. This can also be attributed to the number and variety of properties currently available on the market.”
However, it is not all bad news in these markets. Aucamp explains that investors are taking full advantage of the current market and renting out properties that they are able to purchase at good prices. “This has caused an increase in the rental market overall. With the steady increase in demand for rentals, landlords have an opportunity to select quality tenants. Tenants are advised to maintain a good credit record, as the competition is strong to obtain a decent rental within this market,” Aucamp advises.
She also advises sellers to price their properties realistically to avoid their properties being on the market for a prolonged period of time. “Even in markets with steady demand, it is important to price the home fairly to attract buyers within the current economic climate,” says Goslett.
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Commenting on the Cape’s property market, Jacobs explains that house prices in his markets are still stable, “but overpriced properties do not sell. Properties that are initially overpriced but whose sellers agree to reduce the price do take longer to sell and generally end up selling at a market-related price. There has been a slowdown in demand for new sectional title development as buyers are risk-averse and see more security and value in normal residential property. This is also reflected on the rental side where there has been a significant increase in demand for rental properties due to affordability and risk aversion,” says Jacobs.
Overall, Goslett explains that the sentiment seems to be cautious given the way the economy is performing. “Buyers and investors seem to be more cautious when it comes to making big purchasing decisions within the current market. But, property remains a secure investment option, which is why the property market is still active across the country, despite the high interest rates. My advice to consumers is to build a good working relationship with a local real estate professional to keep informed on how the local housing market is performing and to capitalize on any opportunities as and when they arise,” says Goslett.
SEE | Property24 101 - Buyer and Seller specific advice
In an article published on 11 May 2023, Pam Naidu, Director of Sales and Marketing at Devmco Realty, shared some key learnings which every first-time buyer should know when deciding to purchase their dream home.
1. Location, location, location! Also known as the Three L’s:
There are three micro locations that define the actual location of a property on a macro level. If the property you want to purchase is in an estate for example, you may want to find out what area of the estate it sits in and what that actual area provides, such as a good sea views, etc.
2. Financial stability is important:
Get your credit card payments and debts in order.
3. Budget:
Establish a realistic budget to determine your affordability. Create a budget and try to stick to it so that you can enjoy the process and not put yourself under too much pressure.
4. Find a trustworthy real estate agent:
This is the person that will assist in picking out your potential home and exploring your new neighborhood and is also responsible for scheduling tours and negotiating important contracts on your behalf. Ensure that this is someone you trust, to have your best interests at heart.
5. Get approved:
Get a pre-approval letter before you start shopping! This will help you have realistic expectations on what you can afford.
6. Be mindful of transfer and closing costs:
First time buyers usually tend not to factor these costs in, and it comes as a huge surprise at the end. Doing your homework is a very vital part of house hunting.
Becoming a first-time homeowner can be an overwhelming experience and requires careful consideration of several factors. With the expert advice from Devmco Realty, first-time home buyers can make an informed decision and successfully unlock the door to their dream home.
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