Global headlines are suggesting that 2022 will continue as it has over the past two years: one that is fraught with a low housing inventory; the preference for renovations over selling and buying a property to suit; an increasing interest from first-time homebuyers; and an ever-widening wealth inequality (the latter relevant to the US market).
Here in South Africa, however, are two major influencers that may impact the year ahead: what will happen to the interest rate, and with it the potential of increases in inflation.
Whilst no one can accurately predict the future, leaders of some of SA’s major estate agencies weigh in on what 2022 may bring in a virus-infected world that has changed so much, for so many people.
Harcourts
First up is Richard Gray, the CEO of Harcourts, who provides his interpretation of 2021. “The continued record-low interest rates have meant that the residential property market is still very buoyant. Although unemployment remains concerningly high, buyers are taking advantage of being able to finance their property purchases at more affordable levels. This has resulted in stock shortages in many areas of the country.
“Well-priced properties are, however, selling very fast. New developments are thus launching to pick up the demand. The demand side has been interesting … we have seen more demand for property in the higher price brackets, yet it has lagged in the middle to lower priced properties.”
Overall Harcourts had a successful 2021, with every calendar month realising a sales increase from 2020, but, as most in the industry expect, interest rates will continue to edge up. Gray believes we can expect another 0.75% increase over the forthcoming 12 months, which might see a slowing of buyer demand. “However, this won’t be significant. As more development stock enters the market, the shortages will diminish in certain areas, which will make it less of a seller’s market.
“I really believe that 2022 will, overall, see a continuation of 2021 trends, but in these unusual times, it would be remiss of me not to add that this is assuming there is no major external event.”
Rawson Property Group
Tony Clark, Managing Director of the Rawson Property Group characterises the 2020 market as driven by first-time purchases, and 2021 by a return to market from existing property owners.
“An increase in spending has also motivated favourable sales for buyers and sellers, but while there is a positive outlook on SA’s economic recovery, it’s far from enough to turn the economic tide on its own. The focus must now be aimed at stimulating the economy, which is an extremely important part of preparing for future growth with the hope to boost income, affordability and consumer confidence, as well as settle investor concerns about our country’s ability to take our economic outlook seriously.”
Clark is cautionary about 2022. “Loadshedding is threatening the already low 1.8% GDP growth predicted. At Rawson we hope to see an improved economic growth rate that will contribute to increased income, improve affordability and boost consumer confidence. This could, and it is hoped, drive an increase in property demand among the lower and mid property price ranges. The trigger of price growth will help stimulate healthy competition for property.”
Preparing for the future, The Rawson Property Group has been growing its sales agent staff compliment, up 34% since March 2020, the consequence of which saw the agency’s sales stats increase 2% on average year-on-year over the past two years. “It’s not a bad performance in the midst of a pandemic, and goes to show that no matter what is happening in the world, people still seek a roof over their heads,” says Clark.
“Lenders are coming to the party and we expect them to remain bullish in 2022, with up to 105% mortgages likely to be available to strong candidates in certain market segments for some time to come. With affordability becoming a bit more challenging in 2022, we are, however, expecting to see the continued trend of people pooling their resources to improve their affordability on their home loan applications.”
Seeff Property Group
“2021 was definitely a great year for the property market,” says Samuel Seeff, chairman of the Seeff Property Group, which recorded the highest sales turnover in its 57-year history. “We end this year 36% higher than 2020, and 16% higher than our last record year in 2014.
“It's remarkable how the market outperformed expectations despite the challenges of the Covid-19 lockdowns, July riots and lack of GDP growth, more so in the luxury market, where we saw a significant uptick in areas where we have a strong footprint, and considered as a market leader. Although the bulk of sales are driven by freehold houses, we experienced good activity in luxury coastal apartments, particularly in Cape Town, Plettenberg Bay, the Waterfront and Camps Bay. Fresnaye, Bishopscourt and Constantia were also major contributors to excellent turnover from sales.”
Seeff also says that sales to foreign buyers and SA Expats are also up … “driven by a pandemic-induced desire for better surroundings” and where such activity is being spearheaded by buyers from the UK, Germany and other nations within Northern Europe. The USA and the Middle Eastern countries are also featuring on Seeff Property Group’s sales list along with buyers from Angola, eSwatini, Nigeria, Zimbabwe, Congo, Zambia and Malawi.
“Our performance allows me to remain positive for 2022 for our group, regardless of the recent interest rate increase, which will continue to be the game-changer for the market,” says Seeff. “We call on the fiscal authorities to limit the increases going forward however, as property is such an important element of the full collective of the economy. It has significant multiplying effects with widespread economic and skills benefits well beyond just agents, buyers and sellers.”
RE/MAX of Southern Africa
Adrian Goslet, Regional Director and CEO of RE/MAX of Southern Africa says that the property market, despite the pandemic year, has experienced somewhat of a boom. “Record-low interest rates and the change in lifestyle resulted in buyer activity that kept the real estate market alive and thriving. However, it is difficult to predict, with any kind of certainty, what lies ahead in 2022.”
Where Goslet is cautious relates to what he refers to as the “biggest threat posed to the 2022 housing market,” that being the very real possibility of an ongoing interest rate hiking cycle. “My hope is that any interest rate hikes in the year to come, will simply bring buyer activity to normal volumes, but I fear buyers may not have left room in their budgets to cater for interest rate hikes.
“In this case we might realise an increase in the number of homes entering the market towards the middle to end of the year as buyers become unable to keep up with the repayments on their home loans. This will have a negative effect on property values as supply begins to outweigh demand.”
RE/MAX is, however, starting the year on quite a high. Goslet confirms that national sales totals were up by 76% on 2020 figures, but this doesn’t make it any easier to predict what may happen in 2022, he says. “One of the biggest threats to the property market is the overall state of the economy. Unless we begin to see some economic recovery in the new year, our prediction is that the rental market in particular, is likely to struggle as low affordability levels will continue to put downward pressure on asking prices.
“As it stands rental markets struggled in 2021, as did the commercial market, what with the shift towards a work-from-home structure. One prediction that I can make is that unless we experience greater economic growth in 2022, the trend towards downsizing homes and a decrease in upgrades will continue,” says Goslet.