South African property forecast – a market that suits the buyers

We will remain in a buyers market throughout 2020 as the market continues to correct for the oversupply of housing

 

By Brian Changamire

 

Despite an economically tumultuous 2019, followed by pandemic-plagued 2020, home buyers have reason to be optimistic about a currently resurgent market. There is a reason for optimism. In fact signs indicate that the SA property market is experiencing a resurgence despite the economic difficulties and pandemic.

Not only is there a renewed demand for properties, but the rate of demand for large houses, as opposed to smaller houses in the cities, has increased as well. As a result, property prices have increased by 1.4% up to July, according to FNB data, when they were initially predicted to fall by 5% and 14.5%.

The role of the 2020 interest rate cuts

Another positive development that has contributed to resurgent demand are the interest rate cuts that kicked off the first half of 2020.

In response to the coronavirus, and the damage it was expected to have on the economy, the South African Reserve Bank (SARB) cut the rate by a further 1% on 14 April 2020, after already having cut it by the same amount earlier in March. It was then cut again by 0,5% in May and it was further cut by 0.5% in July.

This means five rate cuts within the space of seven months, taking the prime rate to 7%, the lowest level in over 50 years. So on a bond of, say, R1 000 000, the repayment amount will have dropped from R9 650 at the beginning of January to R7 753 after the rate cut in July 2020.

The lower mortgage rates have naturally created an environment for property investment, with prospective home buyers looking to seize the opportunity before mortgage rates rise again.

A burgeoning market for buy-to-let

More millennials are entering the property market, but research from Momentum Corporate shows that only 40% of millennials are interested in home ownership. They’ve been tagged as ‘Generation Rent’ for a reason. This is all good news for landlords, as millennials form a ready-made market for buy-to-let properties.

Buyer’s market

We are currently in a buyer’s market, and will remain so throughout 2020 as the market continues to correct for the oversupply of housing, and challenging economic times. When house prices get too high, demand decreases, as people are being priced out of the market. The fact that upmarket areas are hardest hit by the deflation bears this out.

Affordable housing

While the luxury housing market continues to experience price deflation, the affordable housing market is doing a brisk trade. This may be a result of government support for first-time home buyers, including a subsidy for low and medium-income earners. – Grand Timeless Promotions

 

 

Touch tomorrow.
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