With the escalation of the Eskom energy crisis and concerns about the economic impact on the already higher interest rate and cost of living concerns, the question arises as to whether it is still a good time to purchase a property.
The short answer is yes, it is still a good market for property buyers and sellers too, says Samuel Seeff.
We have just come off two record years. While demand slowed since mid-2022, weighed down by the rapid rate hikes, the market still ended at a record high in volume and value terms. The 2022 achievement of 238,342 transactions worth over R334 billion across the whole property market, is only just below the highs of 2021 (but higher in value terms).
The 2022 year also traded well ahead of the 2019 pre-pandemic year (205,414 transactions worth R236 billion) and significantly higher compared to the last property boom in 2015 (222,498 transactions worth R230 billion according to Lightstone).
Despite the market growth, price appreciated remained particularly flat, says Seeff. It peaked at around 4.5% (according to FNB data), and is now down to around 3%. The benefit of this is three-fold, he adds. Firstly, buyers are still able to find excellent value in the market. Secondly, sellers are unlikely to face wholesale price drops (except for those who are overpricing).
Importantly, it has also insulated the market against any potential bubble forming. Selling due to financial difficulty is only about 17% of all sales, and most people are still selling for other reasons. Financial-related selling is also still well below the 23% of the early pandemic period.
Seeff says further that even at the higher prime rate of 10.75%, the interest rate is still a positive for buyers. It is still well below the average of around 13%-15.5% of the 2007/8 Global Financial Crisis (GFC) period and significantly below the average any time prior to this.
Mortgage loan conditions are also still particularly favourable for buyers, he adds. Deposit requirements are still below 10% (around 8.1% on average) compared to around 18.2% in 2017 and as much as 23.7% in 2007/8.
Bank approval rates remain well above 80%. Qualifying first-time buyers can still secure a full 100% bond, sometimes with costs, depending on the circumstances. The raising of the transfer duty exemption threshold to R1.1 million and adjustment of the transfer duty brackets is a further boost for buyers.
Properties are generally also still selling fast, taking just 9.6 weeks on average depending on the area and price band. This is notably faster than the generally accepted market average of just over 12 weeks and almost twice as fast compared to the 17.6 weeks during the GFC period.
While regional market variations mean that buyers will be able to negotiate more strongly in the inland provinces such as Gauteng, they would likely need to pay a bit more for property in the Cape and other high-demand hotspots.
The market below R1 million to R2 million is expected to remain the most active, but is also usually the sector which is most sensitive to interest rate and economic fluctuation. That said, Seeff continues to assess the market as stable, and it remains a good time to purchase property. It is also still a good time to sell, provided you price right for the area and current market conditions.
Article Source: https://www.myproperty.co.za/news/market-and-opinion/is-it-still-a-good-time-to-purchase-a-property-02-03-23