After 18 months of unexpected recovery and rebound, the residential property market looks set for yet another year of robust activity and shifting home ownership trends, says Carl Coetzee, CEO of BetterBond. "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."
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. "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."
With this in mind, Coetzee identifies 9 key residential property market trends for 2022:
Semigration is back in full swing with the Western Cape once again being the go-to destination; especially for middle-class Gautengers looking to relocate. Recent data from Lightstone suggests that 35% of people moving provinces are going to the Western Cape, up from the 31% it was in 2020. BetterBond's application volumes for the 12 months ending November 2021 show a 27% increase in applications from the Western Cape. Interestingly, 46% of semigration buyers are moving to smaller but more expensive properties in the province, reports Lightstone. According to BetterBond's November applications, the average home purchase price in the Western Cape is up 3%. Semigration to the other coastal favourite, KwaZulu-Natal, has dropped marginally, says Lightstone. The July riots appear to have had only a slight impact on semigration to this province, says Coetzee.
Coast to coast
The demand for seaside living will persist, especially as people opt for hybrid working models that allow them to work from home for periods of time. According to Lightstone (October 2021) house inflation for coastal properties increased by almost 8%, compared with just below 6% for inland properties.
Unlike 2020 which was the year of the first-home buyer, much of the market activity in 2022 will be from older repeat buyers who have the financial capacity to invest in property. FNB notes a shift in buying activity from younger buyers to those of 35 years and older. This is reflected in the decline in the loan-to-price ratio, reports FNB, as these buyers are able to pay larger deposits on their bonds.
Buy, not rent
Single-digit interest rates will encourage more tenants to consider the benefits of paying a home loan rather than financing someone else's bond. We see from the Absa Homeowner Sentiment Index for Q3 (2021) that positive sentiment for buying instead of renting increased by 6 percentage points to 83% - the highest it has been since the index was launched in 2015. Of respondents who were optimistic about buying property, 47% attributed this sentiment to the low interest rates, while 54% agreed that property is always a sound investment.
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, predicts that the rental market is likely to struggle as low affordability levels will continue to put downward pressure on asking prices. "As it stands, rental markets have struggled this year and, according to the PayProp Rental Index for Q3 2021, rental growth has been minimal, measuring 0.1%, 0.3% and 0.2% in July, August and September 2021 respectively," says Goslett.
Renovations will remain a popular alternative for homeowners who want to upgrade their homes but are unable to invest in a more expensive property. The latest FNB/BER Building Confidence Index reveals that hardware retailer confidence remains high at 77 out of a possible score of 100. FNB attributes this to the DIY and alterations market, as many home owners invested money in upgrading their homes to accommodate their new work-from-home needs.
Micro-living will remain a strong trend in 2022, as people move back into the city centres, says Coetzee. With offices devoting greater attention to creating communal areas that acknowledge employee wellbeing, there will be less need for larger inner-city apartments. According to the Cape Town Central City Improvement District's (CCID) State of Cape Town Central City Report (2020), the majority of developments completed or under construction in that year included micro-apartments. The Uxolo development off Long Street has apartments ranging from 24m and selling for just under R1 million. With no transfer duties payable, these apartments are ideal for young professionals.
Members, not tenants
The proliferation of co-working spaces has sparked a new trend called the club concept, says the CCID. Instead of being a tenant, you become a member of a community where you can share kitchens and work space with access to other common spaces within the group. Neighbourgood in Cape Town (two in Cape Town's CBD one in Adderley Street and the other in Corporation Street) is an example of this new club that provides communal living with short- to medium-term leases. BlackBrick offers members a rental option which includes space in Sandton and Cape Town. As a member, you have access to a variety of services, amenities and events.
As the hybrid work model gathers momentum, we expect to see some return to city centres. However, as many people will only be spending a few days a week in the office, many will opt to settle in suburbs further away from work. These so-called 'exurbs' often offer a broader range of properties at accessible prices. Some companies have also set up satellite offices in these areas, making it easier for employees to spend time at work and home. If one looks at the semigration trends picked up by Lightstone for the Western Cape, for example, the most popular areas are Milnerton, Mossel Bay, George, Strand and Somerset West. Located outside of Cape Town's central city, these exurbs appeal to buyers who want an affordable quality of life without being too far out of town.
While house price inflation for freestanding homes outpaced that of sectional title properties in 2021, we expect to see renewed interest in sectional title properties as people return to work and interest rates start to increase gradually. Lightstone reports that the sectional title market on KwaZulu-Natal's popular north coast has grown and now accounts for 56% of all property in that area. Similar trends can be seen in parts of the Western Cape, as semigration drives demand for accommodation.
Article published courtesy of S A Property Insider
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