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The property market is increasingly favouring buyers across many areas in South Africa, says Samuel Seeff, chairman of the Seeff Property Group.
Although there are fewer buyers in South Africa as a result of high interest rates and a stagnant economy, there is no distress in the property market as of yet, said Seeff.
According to the chairman, the property company is seeing a rise in the number of people who are selling properties for financial reasons (roughly 17% of sales). More people are also selling with the view to semigrate (around 14% of sellers) to the Cape and areas offering better amenities.
Only around 9% are selling to emigrate, said Seeff.
He said there are two elements favouring buyers in the current property market:
Continued favourable mortgage lending conditions
Seeff noted that mortgage lending conditions have been at their best since 2007.
He added that the prime lending rate at 11.75%, while notably higher compared to the last two years, is still below the average of 15%-16%.
Bank data also points to buyers being able to find higher loan-to-value mortgages, even for first-time homebuyers. He said that qualifying buyers can now even secure slightly better interest rates.
This is something we have not seen since pre-2007/8, he said.
Flat price growth
A second important motivator for buyers is flat price growth, said Seeff.
House price growth has trended consistently downwards for the last 18 months. According to the FNB House Price Index, annual growth averaged 2.7% in April while, a year ago, it averaged 4% during April 2022.
Even at the height of the Covid property boom, growth only reached around 6% on average, although some high-demand areas experienced exceptional growth. Comparatively, global markets experienced runaway price growth of 20%-30%.
Seeff stated outside of the greater Cape Town area, price growth has been muted for well over ten years now. The last time that FNB reported double-digit house price growth was around 2007.
He said this is largely in line with weaker economic trends seen over the last decade.
The upside for buyers is that they can find property at prices notably lower than what it would have been had we seen stronger price growth. They can therefore find excellent value, especially in areas such as Gauteng and other inland provinces.
Buyer Advantage
Higher interest rates have pressured potential buyers over the last two years.
“Consequently, the demand-supply curve is now shifting towards the supply side in many areas. We are also seeing higher stock volumes and a lengthening time-on-market which means that sellers asking prices are coming under pressure,” Seeff said.
In a seller’s market, as we experienced in the mid-2020 to mid-2022 period, there was a higher demand for properties compared to the available supply.
While the market turn means buyers must now budget for the higher interest rate, there are plenty of reasons to get into the market now. Seeff said it is always better to buy when the market is weak.
Buyers can benefit from the flat prices and potentially negotiate a better deal on the property. He added that buyers are able to be picky.
Read: Property vs electricity rates in Cape Town, Joburg and Durban – what the data shows
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