Property Insights from Q3 2021 and What to Expect in Q4 and 2022
The State of Property from Property.CoZa
2021 has been a fascinating year for property. At Property.CoZa, we have been closely observing the trends and commentary around the property market. As we race towards the end of the year, our team of property specialists unpack the state of property in 2021 in a clear and understandable way for consumers, letting you know what this means for property for sale, property to rent, property to let, and if you are looking to list your property.
2021: YOUR YEAR IN PROPERTY
The Bar Graph
In the wake of lockdown, South African property experienced something of a market boom. This came from a combination of reopened Deeds Offices and attractive repo rates. Towards the middle of the year, this levelled out slightly, with a lull between April and June. This factor has been attributed to fears over future increased interest rates.
Following the boom earlier in the year, house price growth has dipped somewhat this quarter – a decline from 5.1% growth in April 2021 to 3.5%. This is a natural consequence of high unemployment numbers, the unrest the country experienced in July, and the effect of 2021’s lockdowns. Looking at 2021’s growth overall so far, price growth is in line with inflation. “There’s been a sense of a buoyant market this year, even though the market has just been adjusting to pre-COVID levels, and normal economic factors will start to drive the market in 2022 now that there is a shift in the repo rate,” says Sandy Walsh, MD Property.CoZa, South Africa.
The State of Sales
However, reflecting on the position as we go into December, an upward trend is clear. Demand is still above 2019 levels. Lightstone Property reports that, while property levels are closer to pre-lockdown results at the end of 2021, volumes are still 25% down on 2008 levels. It is sobering to consider that 2008 levels are still used to measure performance in this sector, but it is especially noteworthy when one considers the slow labour market recovery and pricked ears around interest rates in the medium term.
The market’s resilience is discernible from the fact that, despite slower sales in the first months of the year, some companies have reported that sales in the first six months were the highest the country has seen in the past five years, and Property.CoZa also experienced this surge in sales in the first two quarters of 2021.
The Patterns in Price
Property prices have also been on the incline. The nominal price growth nationally was around 4% earlier in the year, February 2021 vs February 2020, which is encouraging considering volumes have declined yet total purchase price paid has increased. This is linked to demand and international economic growth may have some influence, making this feel like a sign of market recovery. “During lockdown, many owners and potential buyers made new lifestyle choices, some deciding to upscale their property to provide for work-from-home needs, as well as schooling from home,” says Walsh. “We also saw a lot of people take this opportunity to move to smaller towns like Port Elizabeth from Gauteng to enjoy a different lifestyle.”
Who is Borrowing and How?
The figures also reflect a lower loan-to-value ratio, with higher upfront deposits paid in 2021 in comparison to 2020 (although these remain lower than those seen in 2019). According to FNB’s property barometer, it is posited that the lowered ratio could be due to a shift towards – predominantly – an older property market (between the ages of 35 and 55), one with greater equity to fund deposits. Lenders are also showing less inclination towards loans in the higher value brackets in the aims of risk mitigation.
The Business of Commercial Property
Industrial property remains more stable than other commercial property areas. According to the results of a Rode survey, office vacancy stands at an average of 14% – the highest figures this century. As the work-from-home trend has lifted with lockdown, fears of another lockdown towards the end of the year (bolstered by low vaccination numbers) keep the office market on tentative ground into the end of the year. “The appetite for commercial rentals have declined considerably over the last year, with lowered volumes, lowered rentals, and dismal vacancy rates,” says Walsh.
The Rode Report also indicates a decline in commercial rental amounts in the country’s major cities and the highest vacancy rate recorded in the last 20 years.
PROPERTY: A GLOBAL CONTEXT
Inflation increases are being observed around the world in response to accommodative monetary policy and global supply chain issues. Interest rate hikes are anticipated on both a domestic and international level to meet higher inflation.
In general, residential property prices in global cities have continued to rise in the third quarter of 2021 –increasing from 8.3% in June to 9.5% in September. While many countries’ economies continue to make a comeback after COVID-19, it has not been without setbacks around new variant concerns and a prevailing sense of uncertainty. However, generally, the world’s real estate continues to exhibit signs of recovery.
PROPERTY IN 2022: OUR PREDICTIONS
“The property market is still below pre-pandemic levels and trying to predict how it will look next year is tricky when economic growth is hampered by ongoing indecision about COVID and the tourism industry is still unable to fully recover,” says Walsh. “Forecasts on anticipated interest rate hikes are difficult to make. However, the Monetary Policy Committee has already made its first move this year by raising the repo rate slightly to 7.25%.”
Shaun Rademeyer, CEO of MultiNet Home Loans reports that since 2020 MultiNet have seen a 6% increase in home loan submissions and a 10% growth in the average requested loan amount. “These numbers seem relatively positive, however if you compare them to 2019 pre-Covid the numbers start to show the rapid growth a low interest rate cycle had on the property industry. 2019 vs. 2021 reflects a 67% increase in bond submissions and 21% in requested loan amount. The main impact the low interest rate had on the market was affordability, the lower the interest rate the more consumers can afford the loan and the higher the rate the less eligible many consumers will be for a home loan. The current hike is unlikely to have a significant impact in Q4 in 2022, however we are heading upward with the interest rates and as we start reaching the 9% to 10% lending rate, we will start seeing a property sale slowdown,” says Rademeyer.
First-time home-buyers remain the most vibrant part of this market and should continue to take advantage of their opportunity to enter the market, while investment property buyers, landlords, and commercial property owners need to remain bullish and consider the risk of investing in this sector.
At Property.CoZa, we predict a levelling out of house price amounts in 2022 as the country continues to navigate ongoing pandemic economics. The resilience of the property market has boosted demand from rentals to ownership – a boon at the expense of the rental market. As demand slows, house prices in the middle segment are the most affected, while the affordable and higher priced properties remain stable.
Whatever the state of the markets, buying a property should never be taken lightly. Consider your risks and opportunities, but do not become daunted! At Property.CoZa, we are committed to giving people the best experience with property through useful online resources and calculators, property listings, and access to a database of property professionals. Visit Property.CoZa for more information.