Interest rate hiking cycle impacts residential market activity

Activity in South Africa’s residential property market has begun to subside, most likely as a result of the interest rate hiking cycle that began in November last year.

According to Lightstone, a total of 36 685 bond registrations were recorded at the Deeds Office between January to March 2022 and the RE/MAX National Housing Report for Q1 2022 reveals that this figure is down 33% on Q1 2021’s figures. The numbers of transfers (both bonded and unbonded) recorded at the Deeds Office for Q1 amounted to 52 241* – down by 9% on last quarter and down by 30% year-on-year.

Of the 52 241 transfers, a total of 26 170* freehold properties and 13 737* sectional title units were sold countrywide (these figures exclude estates, farms, and ‘land only’ transfers). The number of freehold properties registered decreased by 30% year-on-year and by 7% quarter-on-quarter. Sectional titles decreased by 31% year-on-year and by 9% quarter-on-quarter.

Activity within the property market increased largely as a result of the record-low interest rates that we enjoyed since Q2 2020, which is why it was expected that activity would subside as soon as interest rates climbed”, explains Regional Director and CEO of RE/MAX Southern Africa, Adrian Goslett.

A dip in average house prices

The nationwide average price of sectional titles for Q1 2022 is R1 0161 946* (according to Lightstone) which, when reviewed against the figures from previous RE/MAX National Housing Reports, is a decrease of 1% year-on-year and 2% quarter-on-quarter.

The nationwide average price of freehold homes is R1 339 898* which, when reviewed against previous figures, is a 6% increase year-on-year but a 3% decrease when compared to last quarter.

According to Lightstone, year-to-date, the average price changes per annum for sectional titles is down by 2% and 3% down for freehold properties. The Average Active RE/MAX Listing Price for Q4 amounted to R3,291,021.53 – a 6% increase quarter-on-quarter and a 1% decrease year-on-year.

The property market works in cycles, which is why real estate is designed to be a long-term investment so that the highs will balance out the lows. Real estate remains such a high-yielding investment strategy when approached in this way,” says Goslett.   

Lightstone Property data also reveals that the average bond amount granted during this period amounted to R1 315 000. The RE/MAX National Housing Reports reflect that this is an increase of 7% year-on-year. “With the average bond amount climbing, my only caution is that buyers leave room in their budget to make allowances for the coming interest rate hikes”.

Activity remains consistent within price brackets

Minor movement can be seen but no substantial changes occurred within the sales volumes between the various price segments. Sales priced between R800 000 and R1.5 million continue to account for the largest portion at 26.2%* of all transfers occurring during Q1 2022.

Following this figure were transfers priced below R400 000 which now account for 24.2%* of all transfers in Q1. Moved out of its second-place position last quarter, transfers between R400 000 – R800 000 now follow in third place close behind the previous segment at 23%* of the total transfers. Sales between R1.5 million to R3 million accounted for 19.5%* and those priced above R3 million accounted for 7.2%* of the total transfers this quarter.

Market performance per province

In terms of the performance of the RE/MAX of Southern Africa network, higher volumes of sales occurred in KwaZulu-Natal (29% up from same period last year) and the Eastern Cape (1% up), while sales volumes for the rest of the regions are down. This is in line with greater market trends that reflect a decline in sales volumes across the country.

The top five searched suburbs on were as follows:

  1. Bloubergstrand, Western Cape – 3 400 searches
  2. Parklands, Western Cape – 3 368 searches
  3. Sunningdale, Western Cape – 3 064 searches
  4. Fourways, Gauteng – 2 634 searches
  5. West Beach, Western Cape – 2 603 searches

According to Private Property, the median asking price per province of active listed stock on Private Property for Q1 2022 were as follows:

Disclaimer: The data reflected herein represents data that is voluntarily obtained from subscribers from the Private Property South Africa’s website and is based solely on data collected by Private Property South Africa (Pty) Ltd. Further, the data reflected herein is accurate as per the Private Property South Africa database dated 05 July 2021. Reliance on such data is at the sole discretion of subscribers and Private Property South Africa hereby indemnifies itself of any consequence of such reliance.

For every season of hyperactivity (like the one we have just experienced), a season of gradual decline will inevitably follow. Whether we now face a season of gradual decline remains to be seen. But, for as long as interest rates continue to climb, it seems probable that activity will decline along with every interest rate hike. This may present opportunities for buyers who can afford the higher financing repayments, as a decrease in buyer demand will result in lower asking prices. But, every suburb will have its own set of trends that may or may not reflect greater housing market trends. Those who are curious to find out how the market is performing in their area should speak to their local real estate professional for some insights,” Goslett concludes.