The average price of a freehold home in SA has increased by more than 20% in a year
- South Africa’s property market boomed after hard lockdown and the Deeds Office’s reopening.
- Things slowed down in the middle of 2021, with fears over potential interest rate hikes dampening sales and signalling an end to the rally.
- But the property sales figures released in the latest RE/MAX National Housing Report shows that the property market is not slowing down.
- The number of freehold properties registered has increased by 20% compared to the same period in 2020, with the average price of these homes growing by an even bigger margin.
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South Africa’s residential property market is booming, with sales volumes and house price appreciation showing no signs of slowing down in the wake of harsh lockdown restrictions.
The property market has “exceeded expectations” in the third quarter of 2021, according to the latest RE/MAX National Housing Report published on Monday. Fears around possible interest rate hikes and harsher lockdown restrictions painted a grim picture for the market earlier this year.
Activity in the market was subdued between April and June. The number of transfers dropped by 22% compared to the first quarter of 2021, while the average price of sectional titles freehold homes showed meagre quarter-on-quarter growth.
This could’ve signalled the end of the property market rally which followed the end of hard lockdown and the reopening of Deeds Office. But, according to the latest RE/MAX, which looks at the market from July to September, interest in property has experienced a resurgence.
“Understandably, the third quarter of 2020 was a period of unprecedented activity as record-low interest rates and pent-up demand following the Deeds Office closure drove sales to an all-time high,” said Adrian Goslet, the Regional Director and CEO of RE/MAX in Southern Africa.
“But, what could not have been expected was that this period of hyperactivity would last as long as it has. It is now a full year later and we are still seeing record-breaking sales volumes.”
Of the almost 60,000 transfers recorded during this period, half were for freehold properties. The number of freehold properties registered increased by 20% compared to the same quarter in 2020.
This growth extends to nationwide average prices of freehold homes, which in the third quarter of 2021 was R1,352,712. This represents a 21% increase when compared to the same period in 2020. During the height of lockdown, the national median price of freehold homes dropped to R1,109,852, while sectional titles were worse off, dropping to R953,084.
“House price appreciation is strongly linked to the rules of supply and demand. When buyer activity is high, sellers are more likely to achieve higher asking prices. This then causes greater house price appreciation until the demand levels out,” said Goslett.
One of the biggest changes in property trends during the pandemic compared to sales before concerns sales in the various price brackets.
Prior to the pandemic, properties below R400,000 accounted for the largest portion of sales, at almost 30%. Properties between R400,000 and R800,000 made up 24.2% and those between R800,000 and R1.5 million accounted for 25.8% of sales.
Properties in the under-R400,000 bracket have since dropped to 22.9%, according to the latest RE/MAX report. This is a trend witnessed throughout the pandemic. Sales priced between R800,000 and R1.5 million now account for the lion’s share.
“While I am grateful to see the local housing market thriving as it is, I also do not expect that the market will remain this active forever. It is likely that demand will dampen as soon as the cycle of interest rate hikes starts,” said Goslett.
(Compiled by Luke Daniel)
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