What to expect from the South Africa property market in 2022 – and where to buy

We expect to see marginal increases in interest rates during 2022, and economists predict that we won’t see a pre-Covid interest rate for several years. This leaves a favorable environment for real estate buyers and investors, says Paul Stevens, CEO of Just Property.

Context is important when considering the impact of interest rate increases on people’s appetites to buy, he said.

“It’s not as scary as some might think or claim: the 25 basis point increase in the pension rate brings the base mortgage interest rate to 7.25%. In practical terms, this means an additional monthly cost of 151 Rand on a 1 million Rand bond and an additional 452 Rand per month on a 3 Million Rand bond.

“As a result of this increase, we expect the sales market we are trading in to start to slow down.”

He highlighted the emergence of a middle class, especially in cities like Johannesburg and Pretoria, combined with a desire to leave a legacy that serves the real estate sales market well.

“As long as customers show that affordability is there, banks will be ready to lend even with possible further rate hikes in the coming year. That said, there appears to be a slowdown in bank approvals,” Stevens pointed out.

Investment opportunities for 2022

It takes time to recover financially, and nationally nominal house prices rose 3% year-on-year in September 2021, gradually slowing from the pandemic peak of 5.1% in April 2021, according to the report. FNB data, he said. “We expect this same sluggishness in 2022.”

Stevens said there is real growth potential for homeowners investing in systems and properties related to sustainability – ensuring water availability and energy production.

In terms of areas, Stevens recommends focusing on coastal towns. “These are the areas that have performed better from a real estate value perspective, and demand remains strong due to the migration of many people to the coast.”

For good investment opportunities, look for:

  • Small towns near Cape Town like Hermanus, Onrus and Kleinmond in the east, or Langebaan and Saint Helena on the west coast.
  • The Garden Route areas of George, Mossel Bay, Knysna and Plett have also seen strong growth, with many people settling in these towns.
  • In the Eastern Cape, Port Elizabeth, Jeffrey’s Bay and St Francis Bay are seeing unprecedented growth in the number of people relocating and seeking this quality of coastal life.

Real estate franchising is another investment opportunity for hardworking, dynamic, service-oriented entrepreneurs, he said.

A rectification is due

Last year South Africa saw an average increase in house prices of 4.7%, the property expert said, citing data from Lightstone. “Where property prices in South Africa have risen disproportionately due to Covid foreclosure restrictions and the lifestyle changes we have seen in 2021, we expect corrections. “

“While the more affordable properties will still see good growth this coming year, we expect very slow or no growth in the upper end of the market. “

Continued demand for affordable housing

A shortage of affordable housing both in terms of renting and selling is a reality in South Africa, Stevens said. “The average selling price of properties registered with the Deeds Office in 2021 has so far been 990,000 Rand.

“And Michelle Dickens of TPN reports that 50% of tenants are in the R7,000 – R12,000 per month bracket. In light of this, there will be a continued demand for affordable housing to build. “

He said that in 2022, affordable properties will still see good growth despite job insecurity, poor credit profiles and the rising cost of living.

Fewer delinquent tenants

The good news for homeowners, Stevens said, is that there is now a lower percentage of tenants in arrears than in the first quarter of 2020.

According to the PayProp Q3 report, rents have only increased by 0.1-0.2%, while inflation is around 5%. The Western Cape and Mpumalanga outperformed the other provinces with an increase of 3.5% and 2.5% respectively.

“The biggest concern for the coming year is the weakening economy. We have just seen a massive increase in the price of fuel, which will lead to further inflationary pressures. Consumers are struggling to make ends meet.

Stevens said the rental market will remain under pressure for much of 2022. “A lot of prospective tenants don’t qualify because of their low credit scores, and I think it will get worse. We expect great tenants to stay where they are, as many of them did in 2021. ”

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