Property Trends to Watch as Low Interest Rates Remain

The announcement to hold the repo rate steady at 3.5% marks a full year that South Africans have been able to make the most of a historic low-lending environment, says Carl Coetzee, CEO of BetterBond. “With the prime lending rate currently at 7%, the lowest it has been in 55 years, the property market is enjoying an unexpected boom.

Notwithstanding the challenges of the pandemic, the knock-on effect of five consecutive repo rate cuts last year has resulted in a significant market turnaround that is showing no sign of slowing down.”

Coetzee adds that, while the South African Reserve Bank has projected two interest rate hikes of 25bps each in the second and fourth quarters of the year, SARB governor Lesetja Kganyago recently indicated that an “accommodative” approach is more likely to support the economy for as long as possible. “It would make sense to keep the repo steady at or below 4% for as long as possible, for the effects of the lower lending rate to have the desired impact,” said Coetzee.

Tony Clarke, MD of the Rawson Property Group says: “When increases do start happening – possibly towards the end of this year, or early in 2022 – the climb is likely to be very slow, creating little immediate change to the property market.” However, Clarke says property trends are always shifting, particularly as buyers redefine their needs under the “new normal”. 

LOW-INTEREST RATE & PROPERTY TREND PREDICTIONS

Bigger is better

According to Craig Mott, Cape Town Regional Sales and Commercial Manager for the Rawson Property Group, the massive shift towards remote work has directly influenced buyer priorities when looking for the “perfect home”.

“People are spending a lot more time at home these days,” he says. “Buyers are looking for properties that can make that time as comfortable – and productive – as possible. That means more than just home offices. We’re talking larger living areas, more spacious gardens, functional outdoor areas – the whole package.”

Freehold over sectional title

In their search for more space, Mott says more and more buyers are turning to freehold properties over sectional title – the opposite of pre-pandemic trends. “Freehold homes tend to offer more space, more privacy, and more freedom to renovate and make changes,” he says. “Lock-up-and-go is also less essential with travel restrictions keeping most of us grounded.”

Multi-generational living

Clarke says the multi-generational living trend is becoming more common, contributing to the demand for larger properties and properties with multiple dwellings.

“Making ends meet on a fixed or limited income has become extremely difficult in the current economic situation,” he says. “As a result, we’re seeing a lot of young adults moving back in with their parents, and a lot of elderly parents moving in with their kids.”

Decentralisation

Location is just as important to buyers as ever, but Clarke says lifestyle has become a greater priority than proximity to major business hubs.

“A lot of buyers are moving away from major cities in favour of small-town life, particularly along the coast,” he says. “These so-called Zoom Towns are really booming as the popularity of remote work and distance learning increase.”

Residential property 

While 2020 was characterised by lowered interest rates and ample supply of properties on the market, creating favourable market conditions for buyers who wasted no time in snapping up properties, 2021 has brought about stock shortages to much of the country.

“Agents have now focused their efforts to get their hands on enough properties to satisfy demand, particularly in the entry-level market,” says Clarke, “We do expect to see this dynamic shifting, however, with a wave of distressed properties due to hit the market soon. Sellers hoping to minimise competition should definitely get their properties listed as quickly as possible.”

Commercial conversions

Remote work has caused an inevitable decline in the demand for commercial property, triggering a flood of commercial to residential conversions in CBDs. Mott says the result will be a number of new mixed-use buildings with shared workplace, exercise and entertainment facilities.

“It’s an exciting trend that should inject new life into South Africa’s cities, and provide excellent opportunities for buyers looking to ‘get it all’ under one roof,” he says.

Stabilising demand

While the decision to keep interest rates where they are will certainly benefit buyers, Clarke says it is unlikely to cause the same surge in market activity that the initial interest rate decreases did.

“We’re expecting buyer activity to level off now that pent up demand has largely been satisfied,” he says. “Demand will still be high, just unlikely to increase further.”

Coetzee concludes: “The sustained low interest rate environment will go a long way to stimulating the property market, and indeed the economy. While the honeymoon is certainly not indefinite, there is some comfort in knowing that the repo rate is likely to remain at, or below, 4% at least until September next year, creating opportunities for buyers to apply for a bond for their dream home.”

Ref: Rei Mag – June 21