2021 was a remarkable year for the real estate industry and one that will most certainly not be repeated any time soon. Registered bonded properties was up by over 47%, outperforming the average growth rate of 3.63% seen in the previous 4 years. 165 648 bonded properties registered in the deeds office during 2021, compared to the average of 123 643 for 2018, 2019 and 2020. The primary reason for the exceptional growth in 2021 is as a result of the record-breaking low interest rate, this did not only provide cheap capital but also provided the opportunity for a consumer to afford property which normally would have been unattainable at their existing income levels.

But as we so often hear in life, what goes up must come down and this stands true in the property industry, as low interest rates benefit the property industry, the rising interest rates will impact the industry negatively as well.

The last quarter of 2022 already started showing the impact of the increased interest rate cycle, and the rate increases from the SARB has not reached its peak yet. Bank conversion ratios have dropped by 8% and consumer affordability becomes relevant when higher monthly instalment is required to service their debt.

As consumers find it more difficult to get finance from the banks so the impact will be felt on property prices, together with the rising inflation and higher living cost, many consumers may be placed in a position to sell or downscale their properties. This means that where the market a few months back was firmly in the sellers’ hands, we are now moving toward qualified buyers having the bargaining power. The averaged registered bond value increased from R1 062 635 in 2018 to R1 337 445 in 2022 which is an increase of over 26%. With 2022 showing a 17% growth on pre-covid numbers (excluding properties below R250 000.00), we can expect that 2023/24 will be a correction in the average property prices.

However, there is always room for opportunities during changes in the market dynamic. The rental market will once again start to grow, buyers will be able to negotiate better terms on property prices, higher number of properties will be available for consumers to choose from, and banks will be looking to obtain good quality customers. Using a bond origination company will also ensure that you get the best home loans offer as banks will be competing for the credit worth consumer out there.

Current homeowners should be wary of selling out of fear and should look at ways to utilise their assets to meet their monthly commitment, from renting out an additional room to reducing other living cost, property has always been an opportunity to build wealth and over time it can provide you with the financial freedom knowing you have an asset that can be leveraged. Whilst some will unfortunately not be in a position to maintain the cost of owning their properties, it important that they seek the help of a professional real estate agency that can provide them with price insight and listing requirements. Don’t look at 2022 as the new norm and manage your expectations on your property value, the longer you outprice your home the more you will lose in the long run. 

The industry has seen these cycles before and to navigate these changes its important that consumers use the services of skilled professional, estate agencies, attorneys, and mortgage origination companies. They are at the forefront of the industry and will most certainly be your best partners in assisting you with your home selling and buying journey.

If you are looking at buying property MultiNET Home Loans can assist you in finding you the best home loan with the most favourable interest rate, for more information contact us. www.multinet.co.za | 0861 54 54 44 | WhatsApp 061 537 8778