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Property market in 2022: Why investors need to move quickly

Interest rates, inflation, and of course, the pandemic will all be critical factors influencing the South African property market in 2022. Here's how.

Property Market South Africa

Article summary

  • Interest rates were at a record low throughout 2021, but were increased in November 2021 and January 2022.
  • Repeat home buyers are the primary market, as people are looking to upgrade to bigger homes.
  • Homes in remote areas, especially coastal areas, are expected to do well, as more people are working from home.

You can’t talk about the SA property market without talking about COVID. The pandemic’s impact was felt over the previous year, and will continue to be felt in the coming year.

Contrary to expectations, the property market remained healthy despite the lockdowns. This is primarily due to two factors:

  • Interest rate cuts. The South African Reserve Bank cut interest rates several times during the pandemic period, bringing them down to record lows.
  • The demand for larger, more comfortable properties, especially in remote areas, as people were forced to spend more time at home.

What does it all mean for 2022?

The property market is expected to remain a buyers’ market for a while yet, as banks continue to compete for customers, meaning they offer better home loan deals. But a slow down of movement in the market has been predicted.

The following factors will have an influence:

Interest rate hikes

In November 2021, the Reserve Bank introduced the first interest rate hike in a while, raising the repo rate from 3.5% to 3.75%. They then increased it by another 0.25% in January 2022, making it 4%. From May 2022, the prime lending rate is now 8.25%.

More interest rate hikes are likely in 2022, as the SARB attempts to adjust for the rising inflation rate.

Rising inflation

The latest inflation numbers show the biggest increase in five years. Much of this is due to rising fuel prices, and food inflation as a result of supply line disruption.

The cost of electricity rose by 14% in 2021, as Eskom seeks to charge more despite providing less.

These factors put pressure on the middle class, and can be expected to slow property growth.

Repeat buyers

The above factors may lead to a reduction in purchases by first-time home buyers (who were more motivated to buy when interest rates were at a record low); but property investors can still benefit from demand among those who already own home and are looking to upgrade

In fact, there’s likely to be an increase in activity among repeat buyers, who are not going to be put off by the sluggish economy. Properties priced between R1 million and R2 million are expected to do well.

Opportunities for investors

To sum it up, investors will benefit from setting their sights on the following types of properties:

  • Properties located in remote areas, especially coastal areas, as buyers are looking to move to more scenic locations.
  • Properties located in blocks that offer facilities such as gym and work space, as younger home owners seek a balance between being in a city hub but also having a space that can combine the residential with commercial and recreational.
  • Affordable housing developments, as there is currently a shortage in this sector of the market (according to businesstech, the average selling price of properties registered in the Deeds Office in 2021 was R990,000).
  • Properties located on estates, as sectional title properties offer a sense of community, and safe outdoor areas that make the stay-at-home lifestyle more attractive.

If you’re interested in investing in property, or are looking to upgrade to a bigger home, ooba Home Loans can assist by submitting your home loan application to multiple banks, allowing you to compare deals offered by the banks, and choose the one best suited to you.

We also offer a range of tools that can make the home buying process easier.  Start with our Bond Calculator, then use our Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.

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