The interest rate hike in November, growing limited inventory for buyers, higher prices, and the continued flexibility to work remotely could see the housing market level out in 2022 from the growth experienced in the past year.
Although things might level off a bit, it by no means will turn down, the growth in property prices and trends like first-time homebuyers joining the property market will continue, says Antonie Goosen, principal and founder of Meridian Realty.
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“With the SA Reserve Bank (SARB) recently hiking the repo rate by 25 basis points to 3.75%, placing the prime lending rate at 7.25%, the first repo rate hike in nearly three years, there will be some pressure on homeowners, but it would be premature to increase rates again in 2022.
“South Africa’s economic outlook is not looking strong, with the July unrest, the pandemic and ongoing energy supply constraints still having negative effects on investor confidence and job creation.
"The hike in the repo rate might have been premature, inflation was flat for the past couple of months, and we need the repo rate to stay at low levels to support growth in the economy. Globally central banks are supporting economic growth and I am hoping that the SARB does the same in 2022 and that we will not see another hike in the repo rate,” says Goosen.
Ongoing demand from young buyers
Dr Andrew Golding, Chief Executive of the Pam Golding Property group says, "We have already seen the surge in FTHB demand fade as the effects of the aggressive interest rate cuts early last year abate. Although interest rates are unlikely to prove a significant impediment, consumers are dealing with the economic fallout of the pandemic, loadshedding and subdued growth prospects.
That said, SA’s young population does mean that there will always be a steady demand from young buyers – to the extent that they can afford to purchase a home, adds Golding.
"This is especially so since, 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 aforementioned upsizing for additional space due to work from home scenarios to lifestyle moves to more appealing destinations further afield.
Remote working flexibility
"If you can live and work anywhere, it makes sense to live somewhere with a better quality of life in a more desirable location, says Golding.
"With a population of predominantly ‘young’ buyers, many of whom are likely to prefer life in a city hub, the increasing demand for accommodation to buy is helping drive activity in the residential property market, filtering upwards across all sectors of the market, boosting activity in middle markets and higher price bands as some existing homeowners upscale, and even creating stock shortages in high-demand areas."
Goosen says if the prime lending rate stays at the current levels, and employers continue to give the flexibility to work remotely, there will be continued demand for home buying.
“Also, the ability of some to work from anywhere and the pursuit of a better work-life balance, will allow for the trend of people opting to relocate their families out of cities to smaller towns to continue in 2022. Housing stock shortages in the preferred new places will then also continue.
Sonja Thielen, property specialist for Meridian in the Stellenbosch area, says she is seeing the heated pace of sales that was seen in 2021 beginning to show signs of moderation and that home buying will level off, but it will help to increase the number of homes for purchase.
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“With more stock on the market, prices should moderate marginally and the balance between sellers and buyers will become more normal. The higher interest rates could also result in a drop in prospective new purchasers and if inflation does not abate and there is another rate increase, it will take a toll on affordability,” says Thielen
Budget carefully
“With the Reserve Bank forecasting only marginal rate increases each quarter for the next three years, there is still plenty of time to make the most of the favourable lending environment that has helped keep the property market buoyant during the pandemic,” says Carl Coetzee, CEO of BetterBond.
He adds that as Interest rates are unlikely to reach double digits before the end of 2023, the current climate of affordability continues to present an opportunity to invest in property.
Agreeing with this, Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett says that interest rates remained stable for the majority of 2021, which is largely what caused such hyperactivity among buyers.
“My hope is that any interest rate hikes in the year to come will, at worst, simply bring buyer activity back to normal volumes,” says Goslett.
However, Goslett adds that he fears buyers might not have left room in their budgets for interest 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 affect on property values as supply begins to outweigh demand,” he warns.
To prevent this, Goslett 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.
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