Trends in South African real estate

Long driveways, manicured lawns and a litter of puppies were once the perfect aspirational package for an ideal dream home. Well, not anymore!

According to recent trends in South African real estate, there’s a growing preference amongst new buyers for property in security estates and sectional titles over freehold properties in traditional suburbs.

White picket fences – a significant accessory of an archaic childhood dream, could soon be a thing of the past as home owners in old suburbs trade-in their family nest to join gated communities.

Renier Kriek, CEO of Sentinel Homes says the increasing preference for sectional titles can be attributed to the pursuit of safety and better services.

When it comes to the Gauteng property market, buying property in a security estate or sectional title scheme is a better long-term investment, says Kirk.

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Rising interest rates have not only made it difficult for new buyers to secure home loans, but they’ve pushed current mortgage account holders into a corner, having to cope with steeper loan repayments.

As a result, there’s been an increase in the number of ‘motivated sellers’ who can’t keep up with repayment costs.

According to Kriek, this could have a positive effect on the interest rate.

“The increased proportion of ‘motivated sellers,’ selling because they are in a rising costs squeeze, are now likely to stabilise price growth until the rate hiking eases off or starts to reverse,” Kriek says.

Cape Town’s coastal consistency

Cape Town is still a popular property investment destination, even amidst rising interest rates on home loans.

“The Mother City remains very popular despite high prices and strained infrastructure,” Kriek says.

The property rain-maker attributes Cape Town’s real estate resilience to the city’s load shedding buffer due to reliable alternative electricity generation projects and initiatives, alongside it’s lifestyle benefits.

However, Kriek warns that the affordability wave could soon dissipate due to the city’s rising influx of migrants from both within and outside the Western Cape.

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Other regions alongside the West Coast have also experience market growth with fishing villages like Langebaan, St Helena Bay and Paternoster being the main attractions.

“Consumers who work from home are discovering the real value in pricing that was previously only influenced by variables connected to the fishing and farming industry,” Kriek alludes.

Challenges for first time buyers

First-time buyers seem to be moving into the property market much later due to lack of affordable housing supply and financing within the gap housing market specifically for properties selling for under R750 000.

Kirk hopes that government’s Finance Linked Individual Subsidy Programme (FLISP), aimed to improved access to affordable gap housing, will bring some improvement when it comes into effect.

“The expanded policy is still in the nascent stage of implementation, and its effects are likely not to be evident in the market trends until next year,” Kirk says.

Useful tips for first time buyers

If you’re planning to purchase your dream home in the foreseeable future, here are some useful tips to simplify adulting’s biggest decision.

• Find a trusted realtor / estate agent: agents have a bird’s eye view of the real estate market and can help you find a property best suited for your needs and affordability.

• Consult a financial advisor: – find out which financing options are available and ask about the best repayment plan.

• Think ahead:- Cheap doesn’t always mean best. Choose a property with the best long-term investment return.

• Consider hidden costs: – look out for bond registration costs, property transfer costs as well as rates and taxes in addition to your monthly bond repayment, so you can make an informed decision.

• Read the fine print: – Don’t let the excitement of that purchase offer cloud your judgment. Be sure to read your contract thoroughly before you sign on the dotted line.

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Future trends to watch out for

Covid-19 may be a distant memory, but effects of the pandemic are still evident in the real estate market.

The lockdown transformed the workforce as remote work gained popularity. While some companies returned to their office space post-pandemic, others embraced the ‘new normal’ – terminating their lease contracts.

Consumers who work remotely don’t need to consider proximity to the office when deciding where to stay. So, there’s a growing preference for homes in outlying areas away from the city noise.

As an attempt to monetise vacant office spaces, landlords are now switching to the residential market. So, we can expect to see a rise in commercial to residential conversions in the foreseeable future.

If you were sceptical about buying property in the current economic landscape, Kriek believes the time is right.

“You are more likely to buy something you can really afford if you buy it in the current conditions. There is the added upside that prices for properties priced around the average can only really go one way from here – and that is up!,” Kriek concludes.