Today’s Reserve Bank announcement to keep the prime lending rate at 7% comes as a great relief to many cash-strapped consumers. Property experts, on the other hand, have expressed little surprise at this outcome.
“Realistically, we don’t expect interest rates to change just yet,” says Tony Clarke, MD of the Rawson Property Group. “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.”
While interest rates may not be changing any time soon, Clarke says property trends are always shifting, particularly as buyers redefine their needs under the “new normal”.
Both Clarke and Craig Mott, Cape Town Regional Sales and Commercial Manager for the Rawson Property Group share their take on what this means for the property industry and some major trends to keep an eye on.
Bigger is better
According to Mott, 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.”
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.”
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.”
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.”
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.
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.”
Good timing for buyers and sellers
It’s only a matter of time before interest rates begin to climb once again. As such, both Clarke and Mott urge buyers to act sooner rather than later to benefit from the current rock-bottom rates for as long as possible.
Sellers, too, are advised to act quickly in order to tap into today’s lively market.
“As interest rates increase, demand will slow and sales will become trickier,” says Clarke. “It’s one of those rare situations in which both buyers and sellers stand to benefit by acting quickly.”