Local house prices hold steady against high interest rates
Category News
Despite the fact that the housing market has been hamstrung by high interest rates, house price appreciation continues to strengthen, increasing slightly to 4.05% in the July Residential Property Indices Report prepared by Lightstone.
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Offering a possible explanation for this, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that rather than bringing activity to a standstill, the high interest rates have caused activity to shift towards a cash market. "With home finance becoming more expensive, many buyers are instead choosing to use cash when making their purchases. This is especially common in areas that attract those who are semi-grating and who are selling their existing homes and using the cash to purchase elsewhere," he comments.
The Western Cape, for example, has seen high volumes of activity throughout the interest rate hiking cycle. Caron Leslie, Broker/Owner of RE/MAX Property Associates explains that a high percentage of their sales in their areas of operation - Atlantis, Table View, Parklands, Pinelands, West Beach, and Fish Hoek - come from cash buyers. "The high interest rates are not really a factor within our areas. Our areas are still performing well and on average we are obtaining offers within 95% of asking prices. This is across all price bands," she says.
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Rather than seeing a dip in sales, she adds that the office is seeing more purchasers who wish to have a lifestyle change and be free of bond repayments. "There has been a trend from South Africans living and working overseas to purchase affordable properties along the Western Seaboard as they are feeling the high cost of living in Europe and are wanting to invest in properties in South Africa that will offer a good rental return," she adds.
On the other hand, there are other regions that have felt the impact of the higher interest rates. Nadia Aucamp, Broker/Manager for RE/MAX All Stars, explains that in Alberton, Johannesburg South and Germiston, there has been a dip in what Lightstone labels as the Low Value segments (below R250,000).
The report states that, for the first time in recent history, annual property inflation in the Low Value segment was lower than inflation in the Mid Value segment (R250,000 - R700,000).
Interestingly, Aucamp adds that, in her areas of operation, the luxury market has also experienced a similar dip as the low value segments has experienced. "There has been a decrease in sales in the price ranges between R5 million - R7 million. Most of those buyers have shifted down to the R3 million - R5 million price brackets."
With interest rates being as high as they are, Aucamp also notes that there has been an increase in the amount of cash offers their office receives. "Lots of buyers are now selling their homes first and renting until the perfect property comes up. They then take full advantage of putting down a cash offer and negotiating the best price. In our areas, there is about 50% of cash buyers and the remaining 50% relies on the banks for finance," she explains.
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Having adjusted to the current market conditions, buyers seem to be more prepared to purchase property than they were at the beginning of the interest rate hiking cycle. "We have noticed an increase in buyers after the winter and there is overall more confidence in the property market. The quality of buyers is better than before and it seems as if the serious buyers have all their ducks in a row with regards to the financing or cash for the new home purchase," Aucamp notes.
Overall, Goslett feels as though the local housing market seems to be weathering the storm. "While high interest rates have decreased activity within the housing market, there continues to be demand for homes in good areas that are marketed at a fair market value. If you are struggling to sell, speak to a RE/MAX Agent who can help tailor your marketing strategy to attract the right buyer for your home," says Goslett.
READ: Here's what really great locations have in common, along with 6 tips for first-time homebuyers
An article published on Property24 on May 25, 2022, features Ana Roberts of Just Property Upper Highway, who explains that another great benefit of downscaling is that small spaces require less furniture - a few great statement pieces allow for simple, minimalist décor and a beautiful, welcoming home at a fraction of the cost of furnishing a big house. And the cleaning is a breeze!
Less clutter equals less stress, and isn't that what we are all looking for now?
Tips for cosy-home hunting:
Location, location, location - You want to remain close to your family and friends, and have ease of access to stores and other amenities such as doctors, hospitals etc. Narrow your search to areas that tick these boxes.
What are your deal breakers? Does the home offer the main assets that are important to you, for example, a good kitchen, nice family space, shower etc?
Current wants vs future needs - If you are downsizing because the children have moved out and you are getting older, consider a single story with the ease of access rather than a property with stairs that may cause a problem later.
Growing pains - Will you be able to handle the upkeep of a big garden, or is it time for something smaller that is more manageable? Will your pets cope with a smaller space; is there somewhere nearby where you could walk them?
Fit for purpose - Will your favourite furniture fit in the new space? Make a list of every piece with which you can't part. Take measurements. Then take a tape measure with you when you start narrowing down your list of potential new homes.
Storage war - Is there enough cupboard space in the bedrooms and the kitchen? Do you need outside storage too?
Peace of mind - Check the security features of each property you visit. Find out how safe the area is and what security is available. Ask the neighbours, chat to the local police, and phone a security company that focuses on the neighbourhood.
Guest appeal - Consider how many bedrooms you will need going forward - if your kids have all moved out of home, you may only need one spare room for when they or your friends come to stay.
Paper trails - Remember to ask for compliance certificates, even those that aren't required in your province (for example, gas installations and solar geysers should come with a compliance certificate - if something goes wrong and you don't have one, your insurers may refuse to replace the geyser, or cover damage caused by a gas issue).
Complex questions - If you are moving into a complex or an apartment, be aware that there may be the added expense of levies, clubhouse fees and/or security. Ask about historical escalation rates and request a copy of the body corporate rules (if applicable.)
Ask your neighbours if there are any noise issues, does sound travel through the walls and ceiling? How old is the plumbing, the lifts etc - upgrading such items is very expensive and you'll have to contribute. What parking is available for guests?
https://www.property24.com/articles/local-house-prices-hold-steady-against-high-interest-rates/31904
Author: Property24