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1900

The future of property markets

The future of property markets

Author: Andreas Wassenaar
Date: 2023-05-03

As we go through the second quarter of 2023, with the first quarter market data now readily available, a clearer picture is emerging to what we can expect for the remainder of this year. Our current headline data shows CPI Inflation at 7.1% and PPI inflation at 12.2% (inflation of goods leaving factories from producers).

As long as PPI is higher than CPI, inflation is unlikely to adjust downwards. This means that we have to live with our current prime interest rate of 11,25% for a little while. Because the cost of money and mortgage finance is so integral to the property market, there are predictable implications when interest rates rise. We have to go back to 2009 to find interest rates higher than the current, which seems like a distant memory.

If you have a mortgage bond of R2,000,000 and raised this finance a short while ago when bond rates were 7% and have watched your bank statement to see your mortgage repayment grow from R15,506 p.m. to R20,985 p.m. as interest rates increased by 4,25% to 11,25%, then I feel your pain. This is an R5,479 p.m. difference or a 35.33% increase in your bond repayments every month. This is why market demand retreats as interest rates increase.

The rental market surges ahead as more people opt to rent (always cheaper than owning a similar property) for a period. Rental rates have been depressed since 2020 (Covid) but have now started to bounce back exactly as we expected. Shortages will be evident in the rental market, which in turn will start to drive the asking rental rates upwards.

Our composite leading indicator, which is designed to provide early signals of turning points in the business cycle, has shown a steady downward trend over the past year, confirming what we already know at the coalface of property transactions.

We are in a recessionary type of market and people are taking financial strain on the aggregate. With this scenario comes extraordinary opportunities.

For those with cash on hand and unconcerned with the relatively high mortgage rates, this year may prove to be one of the best buying opportunities we have seen for a while. We can expect markets where holiday homes dominate the landscape to be more impacted than most primary resident suburbs, as people tend to sell holiday homes in tighter financial markets.

This is great news for buyers of Ballito apartments as we can be sure some great opportunities will emerge during the second and third quarters of this year.

For those sellers in the market that must sell, there are some things you can do to defend your asking price. You can repaint the property. This is the quickest and best value improvement exercise and will make a property sparkle.

You can fix any small items requiring attention that are readily evident to prospective buyers. You can also ensure the home and immediate surroundings are immaculately clean and presentable. Lastly, be realistic regarding your pricing and carefully consider any offers presented.