Residential property market rebounds faster than expected

Value is determined by recent prices achieved based on square meterage, prevailing market conditions and factors such as the number of competing properties.
Value is determined by recent prices achieved based on square meterage, prevailing market conditions and factors such as the number of competing properties.
  • The FNB Property Barometer for July reports house price growth of 1.4% year-on-year and buyer interest has surpassed pre-lockdown levels.
  • Property is more accessible following five successive repo rate cuts since January.
  • BetterBond's applications from first-home buyers in August are up to 70% year-on-year.


There are early signs that the property market is rebounding sooner than expected, according to Carl Coetzee, CEO of BetterBond.
 
The FNB Property Barometer for July reports house price growth of 1.4% year-on-year and buyer interest has surpassed pre-lockdown levels. It also notes that the volume of mortgage applications has rebounded to pre-lockdown levels across all price bands.

BetterBond's data for August shows that there has been a 52% increase in bond applications year-on-year.

Furthermore, property is more accessible following five successive repo rate cuts since January. With the drop in the prime lending rate from 10% to its current historic low of 7%, many South Africans, who would otherwise have been unable to qualify for a bond, will now be able to afford their own home, according to Coetzee.
 
BetterBond's applications from first-home buyers in August are up to 70% year-on-year. The average monthly household income of BetterBond's first-home buyer applicants is close to R40 000. So, buyers with an individual (or combined) income of this amount, and with a maximum bond repayment of R12 000 and an interest rate of Prime at 7% over 20 years, are now able to afford a home valued at close to R1.6 million - almost R305 000 more than would have been possible at the start of the year when the interest rate was at 10%.
 
BetterBond's average home purchase price for August was up almost 2% year-on-year, while the average home price for first-home buyers increased by 2.7%. Much of the activity in recent months has been at the lower end of the market, and BetterBond reports a 4.6% year-on-year increase in applications for homes between R1 million and R1.5 million, and a 6% increase in applications in the R2 million to R2.5 million price band.
 
"The sustained increase in applications for August confirms that the performance in the property market is no longer attributed to pent-up demand created during lockdown. It is a direct result of the low-lending environment and the banks' appetite to provide finance, and suggests a significant shift in buyer confidence at a time when there is widespread uncertainty," says Coetzee.

Competing buyers

Buyers competing for homes priced below R2.5 million are in some instances pushing up asking prices, according to Richard Day, CEO of Eazi Real Estate.

"Not only are asking prices in this price band readily being achieved, they are also sometimes being exceeded, with these high demand properties selling in one or two days," says Day. "This is occurring where buyers are submitting competitive offers, resulting in properties being sold for above the asking price."

He also says that, with interest rates at record lows and no transfer duty payable on properties up to R1 million, many of Eazi's purchasers are first-time buyers and young couples or families, including those upsizing or downsizing. This trend is underlined by mortgage originator, Ooba, whose first-time buyers in August (2020) comprise 53.4% of total mortgages.

"Interestingly, and probably as a result of the lockdown restrictions, in the sectional title market we are seeing a trend towards homes with gardens as outdoor space is considered increasingly appealing," says Day.

Tiaan Pretorius, a property consultant with Seeff Centurion, agrees that currently the main draw card of a property is the price, so it is important to make sure it is priced correctly and offers value compared to the other properties available to potential buyers.
 
Value is determined by recent prices achieved based on square meterage, prevailing market conditions and factors such as the number of competing properties. Marketability depends on how ready the property is to sell, such as whether it is priced correctly, the level of demand and how it compares to other similar properties.

Median prices

The RE/MAX National Housing Report for the third quarter of 2020 indicates that, based on figures from the Deeds Office, the property market has shown some steady signs of recovery after being brought to a complete standstill as a result of the national lockdown during the second quarter of 2020.
 
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says for the third consecutive quarter, the national median price of sectional titles dropped when compared to the previous year. At a median asking price of R970 381, the third quarter reflected a 5% drop year-on-year. Yet, despite this drop, the median asking price for sectional titles saw a small correction with an increase of 2% from the R953 084 reported in the second quarter of 2020.

On the other hand, the current national median price of freehold homes jumped back to where it had been in the third quarter of 2019 at R1 115 670. When compared to last quarter, the median asking price increased by 1%.

The average active RE/MAX listing price amounted to R3 469 844.52 in the third quarter of 2020, which is a 15% increase year-on-year and a 23% increase quarter-on-quarter. The average bond amount granted during this period increased by 12% since last quarter to R1 110 000 and by 2% since the third quarter of 2019.

Airbnbs up for sale

Grant Smee, managing director of Only Realty, notes an influx of Airbnb units that are now up for sale.

"Cape Town is a unique property market. Properties in tourist hot spots generally sell for R2.5 million-plus, so attracting local buyers and tenants in this price category remains a challenge," he explains.

In Smee's view, there is a unique equilibrium at play in the residential property industry.

"Properties over R2.5 million operate in a buyer's market because of the higher price point, while properties under R1.2 million operate in a seller's market," he explains.

"In comparison to our business hub, Gauteng, properties in Cape Town CBD and Atlantic Seaboard average R20 000 more per square meter and would normally welcome foreigners and corporate travellers throughout the year. To extend their buying pool, we have seen an increase in the number of homes being marketed to international investors."

Semigration

Smee further notes that since travel between provinces opened, Only Realty has seen an increase in the purchase of coastal homes.

"Semigration is the act of moving from one local province to another. With many now able to work from home, we are seeing an increase in people moving from bustling Joburg to the likes of Umhlanga, Port Elizabeth and quieter parts of Cape Town," he says.

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