- The prime lending rate has been at a record low for a while, but interest rate hikes are expected in 2022.
- The stay-at-home lifestyle of the pandemic era has led to an increase in demand for more spacious homes.
- The luxury property market was expected to suffer in an unstable economy, but has actually seen an increase in activity.
In this age of constant change, the stability of bricks and mortar is especially appealing, and property investment remains a solid foundation for economic prosperity even in such tumultuous times.
But in what way will world events be reflected in the movements of the property market in 2022? The decisions of the South African Reserve Bank, the influence of the pandemic, and Eskom loadshedding are some of the factors expected to have significant influence.
The critical factor: Interest rates
Since April 2020, South Africa’s prime lending rate has been at its lowest point in decades. This was the result of a succession of interest rate cuts intended to keep the economy alive during this critical pandemic period.
The low interest rates mean the property market has favoured home buyers for a long period. Of course, such things don’t last forever, and at some point the South African Reserve Bank was going to start raising the interest rate.
Sure enough, in November 2021, they announced a slight increase from 3.5% to 3.75% in the repo rate. While such a small increase may not bring about seismic changes, it does function as a potential sign of things to come.
The prospect of further increases to the interest rate in 2022 is one of the two key factors influencing property trends. The other, of course, is the pandemic.
Property trends in South Africa
As a result, here are the trends you should take into account if you’re looking to buy or sell a property:
1. Existing home owners returning to the market
The low interest rates led to an increase in first-time home buyers, and this is expected to continue as they look to take advantage of the buyer’s market while it lasts.
But the prospect of interest rate hikes, as well as the lifting of the lockdowns, means existing home owners are gradually returning to the market, with the intent of selling their homes and upgrading to properties more compatible with the stay-at-home lifestyle of the pandemic era.
2. Rising demand for spacious homes
Following on from the last point, the pandemic has led to a demand for more spacious homes, as more people are forced to work from home, or at least spend more time at home than they’re accustomed to.
This means that sectional title properties, which were enjoying increased popularity for a while, are now seeing a reversal of those fortunes as more people opt for the greater freedom granted by freehold properties. It also means higher demand for homes versus lower demand for apartments and townhouses.
3. Rising demand for homes in remote areas
Another consequence of the pandemic; city folk are more willing to uproot and move to the suburbs, or even the countryside. Many of them are working from home anyway, and will trade the convenience of city living for the space and comfort of bigger properties with outdoor spaces.
4. Rising demand for off-the-grid living
Environmentalism has been an influence on property trends for a while, leading property developers to take energy efficiency and green living into account. Now, thanks to Eskom shenanigans, the energy issue has become even more prominent.
This is demonstrated by many of the new developments in Cape Town and Johannesburg, which are not only incorporating greener design, but including backup power generators and other off-the-grid features.
5. Rising demand for both entry-level and luxury homes
The market for entry-level properties has thrived as a result of the rise in first-time home buyers, but surprisingly, the luxury property market is also seeing an increase in activity. It was expected to drop off in these tough economic times, but the desire for more spacious homes is keeping the market alive.
Furthermore, the purchase of luxury homes by foreign buyers may increase as travel restrictions are loosened.
Take advantage of the buyer’s market while it lasts
Interest rate hikes are a possibility in 2022, but not a guarantee, and if they do occur, it may only be later in the year.
There’s still time to take advantage of the low interest rates, and if you’re looking to invest in property during this critical period, ooba Home Loans can help you secure the best deal on your home loan by submitting your application to multiple banks, allowing you to compare deals.
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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