Property buying activity is expecting to remain strong next year, despite increasing interest rates.
South Africa’s housing market is in for a healthy 2022 with a number of aspirant home owners expected to take their first steps on the property ladder.
The recent interest rate increase – and ongoing predicted increases throughout the new year, will undoubtedly deter some buyers from taking the plunge but, generally, rates are still low enough to fuel home ownership.
With the Reserve Bank forecasting only marginal rate increases each quarter for the next three years, and interest rates unlikely to reach double digits before the end of 2023, Carl Coetzee, chief executive of BetterBond says “there is still plenty of time” to make the most of the favourable lending environment .
“We expect more tenants to consider the benefits of financing their own homes before the prime lending rate surpasses the 10% it was at the start of 2020.”
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Echoing this, Tony Clarke, managing director of the Rawson Property Group, says the “small, incremental” increases over the course of next year are not expected to have much impact on the current strong demand for property.
“Consumers have proven very resilient and their confidence in property as an investment remains strong.”
Lenders, too, are expected to remain bullish in 2022, with up to 105% mortgages likely to be available for some time to come, he says.
“Buyers with deposits will always get preferential interest rates, but lenders are taking a more open-minded stance with low-risk applicants looking to maximise their buying power.”
Andrew Golding, chief executive of the Pam Golding Property group, says the country’s residential property market is expected to remain active next year as the long-term appeal of the sector holds strong.
“This is especially because, in addition to the usual reasons for movement in the marketplace, the lockdown has inadvertently created the rationale for a wave of new reasons for relocation and property acquisitions – from the upsizing for additional space due to work from home scenarios to lifestyle moves to more appealing destinations further afield.
“If you can live and work anywhere, it makes sense to live somewhere with a better quality of life in a more desirable location.”
With a population of predominantly young buyers, many of whom are likely to prefer life in a city hub, Golding says the increasing demand for accommodation to buy is helping drive activity in the residential property market.
Despite favourable market conditions however, Clarke states that financial pressure on consumers remains high, and affordability could become more challenging in 2022.
Similarly, Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa, fears that those who purchased property while the interest rates have been low, might not have left room in their budgets for rates to climb.
“In this case, we might start to see an increase in the number of homes entering the market towards the middle to end of the year as buyers become unable to keep up with the repayments on their home loans. This will then have a negative effect on property values as supply begins to outweigh demand.”
To prevent this, he encourages homeowners to budget carefully for the year ahead and to identify areas where they can cut back on should interest rates climb and bond repayments increase over the course of 2022.
Although Goslett says it is difficult to predict next year’s market with any certainty, he is hopeful that any interest rate hikes in the year to come will, at worst, simply bring buyer activity back to normal volumes.
Regardless, he states that the country’s property market is resilient and that no matter what lies ahead, property will “remain a good long-term investment strategy”.