This two-bedroom apartment is for sale in Kyalami for R1.695 million. Photo: QG Realty/Property24
  • House prices are showing surprising growth, despite the weak state of the local economy. 
  • Currently, homes are only staying on the market an average of almost 11 weeks, far shorter than the long-term average of more than 13 weeks.
  • More younger people are buying homes - which is putting more pressure on the weak rental market.
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As the fallout from the pandemic and lockdown continues to hurt the local economy, a similar impact was expected on the residential property market, with experts predicting that house prices could fall by between 5% and almost 15% this year. 

Instead, prices are climbing. The latest FNB House Price Index (HPI) shows annual house prices rose by 2.8% in the year to August, up from 1.8% in July.

Surprisingly, the average time a home stays on the market before it is sold has shrunk to only 10 weeks and six days – from 13 weeks and four days in the first quarter of the year. The long-term average is 13 weeks and three days.

There has been an unexpectedly rapid recovery in market activity since the easing of lockdown restrictions, FNB said in a statement, with signs of “buyer exuberance” thanks to the lowest interest rates in 50 years, lower prices in some (mainly affluent) suburbs and lower transfer duties.

These factors have lured renters and first-time buyers into purchasing property, says FNB. Data from the Deeds Office shows that younger buyers (below 35 years) now account for 43% of residential sales, from 38% in 2019

As more people move from being tenants to owners, this is piling even more pressure on SA’s struggling rental market. Demand for rental properties is at a record low, while the supply of properties is still high, reports the Tenant Profile Network, a credit bureau that tracks tenant payment behaviour. Almost a fifth of residential rental properties in Sandton, Soweto and eThekwini are now standing empty.

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“Our initial expectations were for the pandemic to have a more chilling and lingering impact on [home-buying] activity, with demand picking up only later this year and extending into next year. In contrast, the FNB mortgage applications data, combined with data from mortgage originators, shows volume of new mortgage applications have surpassed pre-lockdown levels, reaching new highs in the last three months,” FNB said in a statement.

The busiest segment is for homes between R750,000 and R1.6 million, with 72% of estate agents in this market, who were surveyed by FNB, satisfied with the current conditions. The higher end of the market – above R3.5 million – is struggling more, with only half of estate agents satisfied.

Recent data from Lightstone shows that properties in the coastal provinces are outperforming, with average house prices in Gauteng only increased by 0.8% in the year to July, but the Western Cape (+4.4%), Eastern Cape (+5.4%) and KwaZulu-Natal (+5.0%) are seeing stronger growth.

FNB cautions, however, that there is still a great deal of uncertainty about whether the current buoyant conditions will last – with only half of all estate agents expecting that activity will increase over the next three months.

Lenders are also still cautious, given that more job losses are still expected, and South African Reserve Bank (SARB) data shows the pace of mortgage extensions have remained stable at around 3% in the year to August. 

“There is still a great deal of uncertainty around the lasting impact of the pandemic. In particular, our expectation of a significant weakening in labour market conditions implies that there will be greater downward pressure on house prices in the medium term," FNB said.

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