Real estate market forecast for 2022

Remarkably, during a pandemic year, the real estate market experienced a certain boom.

Record interest rates and a change in lifestyle led to an increase in buyer activity which kept the real estate market alive and thriving.

With this year coming to an end and with the New Year in sight, RE / MAX Southern Africa Regional Director and CEO Adrian Goslett said it’s difficult to predict with certainty what lies ahead.

“When we first entered a strict foreclosure last year, we predicted that the real estate market, along with everything else, was likely to collapse. But, contrary to what everyone in the industry predicted, the real estate market rebounded and fared better than in the pre-pandemic years.

“Then there was the KZN riots and everyone predicted that the real estate market would inevitably take a hit, but again the market remained strong and the impact was barely noticeable.

“Now, as we prepare for 2022, I remain hesitant to make any predictions other than to say that the South African real estate market is resilient and no matter what lies ahead, real estate will remain a good investment strategy for us. long term, ”Goslett said. .

The biggest threat to the housing market next year is the real possibility of an ongoing cycle of interest rate hikes.

“With Reserve Bank forecasting only marginal rate hikes each quarter over the next three years, there is still plenty of time to make the most of the favorable credit environment that has helped keep the real estate market dynamic for the next three years. pandemic, ”said Carl Coetzee, CEO of BetterBond.

He added that interest rates are unlikely to hit double digits before the end of 2023, as the current affordability climate continues to present an opportunity to invest in real estate.

Agreeing with that, Goslett noted that interest rates remained stable for most of 2021, which is largely what caused such hyperactivity among buyers.

“Hopefully any interest rate hikes in the coming year will, at worst, simply bring buyer activity back to normal volumes,” Goslett said.

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However, Goslett added that he was concerned that buyers had left no room in their budgets for interest rates to rise.

Here we could see an increase in the number of homes entering the market around the middle or end of the year as buyers become unable to keep up with their mortgage repayments.

“This will then hurt property values, as supply exceeds demand,” he warned.

To avoid this, Goslett encouraged homeowners to budget carefully for the coming year and identify areas where they can cut back if interest rates rise and bond payments rise throughout 2022.

Another threat to the real estate market is the general state of the economy.

“The housing market is closely linked to the performance of the economy as a whole. Barring an economic recovery in the new year, we expect the rental market, in particular, to be likely to struggle as low levels of affordability continue to put downward pressure on asking prices.

“As it stands, the rental markets have struggled this year and, according to the PayProp Rental Index for the third quarter of 2021, rental growth has been minimal, measuring 0.1% respectively, 0.3% and 0.2% in July, August and September 2021, ”Goslett said. .

In the commercial real estate space, it’s difficult to predict what could happen in 2022. Since the pandemic, Goslett has explained that many commercial real estate lots have remained vacant as businesses have turned to a work-from-home structure.

“Some companies have reduced their premises or have completely abandoned their physical offices. It remains to be seen whether this trend will continue. “

Evidence of this trend can be seen in the slight increase among those who have moved to larger homes since 2019.

According to a Lightstone property report, those upgrades had fallen to 33% in 2019 and 2020, and jumped to 34% in 2021, which can be attributed to “more people moving into larger homes that offer greater flexibility in working from home ”.

The same report also indicates that, overall, more people move down (24% in 2015 to 27% in 2021), while fewer people move up (37% in 2015 to 34% in 2021). Goslett predicted that unless we experience greater economic growth in 2022, this trend is likely to continue over the coming year.

He pointed out that the above forecasts are for the South African housing market as a whole, but cannot explain the performance of each micro-market.

“Each suburb will have its unique trends which may or may not keep up with what is happening in the larger real estate market. The best way to find out what’s going on in your local market is to contact your nearest real estate agent to find out what opportunities might exist for you, ”Goslett concluded.

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