The property market in South Africa has been one of the few to remain stable against the oncoming storm of the global pandemic. It’s fair to say that the last two years have been a lesson in expecting the unexpected, but we still have a few 2022 predictions up our sleeves.
- The interest rate could creep up to about 8%
The repo rate is one of the top concerns for homebuyers. While we do foresee a small rise, this isn’t all doom and gloom for your monthly repayments. Don’t panic!
In November this year, the Reserve Bank announced an increase of 25 base points from 7% to 7.25% on the interest rate. When you break it down month-by-month, the increase adds a minimal amount to your bond repayment – approximately R150 per month on a bond repayment for a property valued at R1 million linked to prime.
While we can expect the repo rate to creep up incrementally over the new year, experts don’t foresee it passing 8%. Remember, this is still significantly lower than the 10% interest rate we saw at the beginning of 2020.
- Prime location is still on vacation
Following the work from home shift after 2020, we saw a wave of seaside properties being lapped up. In the Eastern Cape alone, mortgage bond applications increased by 194%. While many traditional offices in metropolitan areas remain closed, we expect the semigration (buying second homes) trend to coastal and zoom towns to continue.
Excitingly, experts predict that investment in entry level properties in the new prime locations, especially inland zoom towns, should increase in 2022. We expect continued growth for first time buyers in the price band of R800 000 – R1.2 million, offering a welcome boost to local economies.
- Home study requests are on the rise
If you’re selling a property in 2022, you might want to flip a bedroom and make it an office. The work from home trend has seen a huge increase in demand for studies – yes, even plural. The trend has got architects and engineers thinking of new ways to optimise spaces for our post-pandemic home requirements.
- Property values to grow but slowly
Between 2020 and 2021, the average residential property price climbed by 4.5% following the uncertainty at the start of the pandemic. While the recovery of the property market is still progressing and doing well, the growth in 2022 is likely to reflect a smaller (but still positive) figure.
While capital appreciation may slow, year-on-year growth across South African bond applications increased by 40% in March 2021. A high demand for property assets is incredibly positive and should allow a slow trickle of growth despite the economic downturn caused by the pandemic.
- Rental market set to recover
It’s been a tough time for tenants and landlords alike, but we hope that 2022 will bring good things for both. The third quarter of 2021 started showing signs of recovery in the rental market already. In 2022 we expect this recovery to continue with increasing rental demands and a general increase in what tenants can afford. Landlords should remain forgiving but can expect an optimistic increase of about 3% in rental yield.