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Demand for affordable homes to drive development in 2022

A shortage of affordable housing from both a rental and sales perspective is a reality in South Africa. The average selling price of properties registered in the Deeds Office in 2021 so far is R990 000.

Michelle Dickens of TPN reports that 50% of renters are in the R7 000 - R12 000 per month bracket. Taking this into account, there is going to be an ongoing demand for affordable housing to be built.

In 2022, affordable properties will still see good growth despite job insecurity, poor credit profiles and the increasing cost of living.

A correction is due, but it’s expected to be mild, adds Just Property CEO Paul Stevens.

"We have not seen the same surge in property prices that the US has seen over this past year. The average price increase in the States has been double digits in most states, and according to a recent NAR report, 3rd quarter 2021 compared to the same period the year before, has seen an average increase of 16% in house prices.

"By comparison, this past year South Africa has seen an average increase of 4.7% (according to Lightstone). Where SA property prices escalated disproportionately as a result of COVID lockdown restrictions and the lifestyle changes we saw in 2021, we do expect corrections.

"While the more affordable properties will still see good growth this coming year, we are expecting to see very slow to no growth in the upper segment of the market."

Estate living and sectional title properties have become popular

Since 2020, the demand for generally lower-priced sectional title units has also been driven by a huge number of first-time buyers taking advantage of low interest rates to become homeowners rather than tenants.

This is according to Chas Everitt CEO Berry Everitt who says that with so many city residents being concerned about their personal safety and security, it is no surprise that the demand for sectional title flats and townhouses in secure complexes has risen steeply in recent times, or that sectional title sales as a percentage of the whole have doubled to around 30%.

After a notable dip mid-year, ABSA’s Homeowner Sentiment Index (HSI) for Q3 2021 reported a remarkable recovery in confidence levels in property. According to Tony Clarke, MD of the Rawson Property Group, this matches the Group’s experience of market activity.

“I always say, no matter what’s happening in the world, people need a roof over their heads,” he says. “It was very interesting to see that opinion directly echoed by respondents to ABSA’s survey.”

ABSA found that 53% of survey participants believe that property always increases in value, while 52% believe that property is – and has always been – a secure asset. These are not, however, the only reasons cited for improved homeowner sentiment, which ended Q3 2021 at 82% (five percentage points higher than the previous quarter).

Gauteng scored highest for property market sentiment, climbing 4% to 83% overall. The Western Cape came in second at 82% (after a 1% increase), while KZN climbed 6% to reach third place at 79%.

“It’s interesting to see that, although buyer sentiment rose six percent from Q2 to Q3, it still ended one point lower than Q1,” says Clarke.

“This isn’t entirely unexpected – 2020’s boom of buyer enthusiasm had to level off at some point. We expect it to hover around this point for some time to come, despite November’s interest rate increase.”

However, Everitt says, rising interest rates and rising prices are likely to decrease buyer affordability and make it more difficult to qualify for home loans over the course of 2022.

“Rising unemployment is also a very real concern for the market as a whole. However, we see no reluctance on the part of the banks to grant home loans to those who do qualify – in fact quite the opposite – so what we anticipate is that keen buyers will simply adjust and start purchasing smaller homes or in less expensive areas.”

If, and when, interest rates rise in 2022 remains a key consideration for those looking to invest in a new home. However, economists are predicting that we will not see pre-Covid interest rates for several years. This leaves a favourable environment for buyers and property investors alike.



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