Muizenberg - The future looks promising.

Greetings to all our readers, and welcome to our September 2023 newsletter. It's been quite a month, with the Rugby World Cup in full swing and the hopes of a nation soaring high. Although winter has held its ground tenaciously, we're eagerly anticipating the warmth of the sun. The future looks promising, as summer has a way of lifting our spirits. And to add to the positive vibes, the Reserve Bank has maintained interest rates, offering some relief to our fellow South Africans who have been facing financial challenges.

Let's delve into some key highlights from the property market:

1. Rental Market on the Rise:The rental market is finally showing signs of shaking off the stagnation that has plagued it for some time now. More rental properties are becoming available, and landlords are gradually returning to the market. This resurgence is, in part, a result of the clear divergence between the Rental Market and the Purchasing Market, which had become almost indistinguishable during the height of the COVID-19 pandemic when interest rates were considerably lower.

2. Shift in Pressure to Sellers: With interest rates on the rise, the pressure is shifting to sellers, particularly in terms of their asking prices. Some previous buyers have stepped back or are grappling with affordability issues due to these rate increases. For sellers who are serious about achieving a sale within a specific timeframe, the challenge lies in pricing their properties correctly to attract buyers. Balancing logic and emotion can be tricky, as everyone hopes to secure the best possible price for their property.

The Impact of Rising Interest Rates Since COVID:  The impact of rising interest rates since the pandemic is becoming increasingly evident. According to the Rode report, nominal prices in South Africa's housing market grew by a modest 2.5% in the first two months of 2023, a significant drop from the 4.2% growth seen in 2022. The 2023 Q1 Rode's Report on the South African Property Market attributes this decrease to lower effective demand for property, influenced by a weakened economy, higher living costs, and the aforementioned rising interest rates.

Understanding the Interest Rate Situation: During the COVID-19 pandemic, the property market was supported by a prime interest rate lowered to 7% to ease financial burdens on households. However, the prime interest rate has since climbed to 11.25% due to nine consecutive interest rate hikes since November 2021. This has resulted in higher monthly mortgage payments. For instance, a R1 million, 20-year loan now demands a monthly mortgage payment of R10,492, compared to R7,752 previously.

Challenges for Buyers and Sellers: Buyers are now grappling with a roughly 22% decrease in affordability, which inevitably puts pressure on sellers. It's important to note that this doesn't signify a decline in property prices; rather, it reflects a shift in preferences towards more affordable options. People are now seeking properties in the R2.5 million range rather than the previously sought-after R3 million homes.

In conclusion, the key takeaway from these developments is that sellers must price their properties to cater to the changing preferences and affordability of potential buyers. We hope this information helps you navigate the ever-evolving property market. If you have any questions or wish to discuss further, please don't hesitate to reach out to us. We're here to assist you.