Despite facing some economic headwinds, South Africa’s property market still presents many good opportunities for both buyers and sellers in the country, says Samuel Seeff, the chairman of the Seef Property Group.
He said the market ended 2022 on a record high in terms of both volume and value despite coming off slowed demand since the middle of last year, where the market was weighed down by rapid rate hikes.
Across 2022, there were a total of 238,342 transactions worth over R334 billion across the whole property market – just below the highs of 2021, although higher in value terms, said the chairman.
The 2022-year also traded well ahead of the 2019 pre-pandemic year – which saw 205,414 transactions worth R236 billion, according to Lighstone – and significantly higher compared to the last property boom in 2015 – which saw 222,498 transactions worth R230 billion.
However, despite the market growth, price appreciation remained particularly flat, said Seeff. “It peaked at around 4.5% and is now down to around 3%.”
But even in this environment, benefits can be found. Seeff said that:
- Buyers are able to find value in the market due to lower prices;
- Sellers are exposed to pricing stability and are unlikely to face wholesale price drops;
- The market is insulated against any potential financial bubble forming, as has been seen in other countries.
Seeff said that selling due to financial difficulty is only about 17% of all sales, with most people selling for other reasons. Financial-related selling is also well below the 23% seen during the early pandemic period, pointing to a more stable financial situation for many.
And even though ever-increasing rate hikes have taken their toll on the prime lending rate, the chairman said the interest rate is still positive for buyers.
The South African Reserve Bank hiked rates at the end of January, taking the prime lending rate up to 10.75%.
“(Prime) 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,” he said.
“Mortgage loan conditions are also still particularly favourable for buyers,” he added.
The average deposit required is around 8.1% – below 10%, significantly lower than 18.2% in 2017 and as much as 23.7% in 2007 and 2008 – and bank approval rates remain well above 80%, Seeff said.
Qualifying first-time buyers can still secure a full 100% bond – sometimes with costs – depending on the circumstances.
Raising the transfer duty exemption threshold to R1.1 million and adjusting the transfer duty brackets is a further boost for buyers, said Seeff.
Regarding the rate at which properties are being sold, the chairman said they are in general, selling fast – taking around 9.6 weeks on average.
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, Seeff said.
The market below R1 million to R2 million is expected to remain the most active but is also usually the sector most sensitive to interest rates and economic fluctuation. Despite this, Seeff expects the market to remain positive.