Housing market shows 'unexpectedly rapid recovery'


The annual house price growth rebounded to 1.4% y/y in July, down from an upwardly revised 0.7% in June and 0.6% in May. This bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the lockdown restrictions were eased according to FNB senior economist, Siphamandla Mkhwanazi.

He says initial expectations were for the pandemic to have a more chilling and lingering impact on activity, with pent-up demand filtering through only later this year.

"In contrast, the volume of new mortgage applications has rebounded beyond the pre-lockdown levels and across the price spectrum. This is also supported by the volume of buyer leads, derived from web traffic to property portals, which has risen above expectations."

Geoff Lee, managing executive of home loans at Absa, said there was a sharp decline in home loan applications up until Level 3.

"Encouragingly, we have seen an increase in the number of home loan applications month on month from June 2020. It is still too early to say if this is sustainable, application volumes continue to increase month on month and are seeing numbers that are higher than pre-lockdown."

Steven Barker, head of lending products at the Standard Bank, says current home loans applications are up by 30-40%, although all of these are not approved. However, more applications are approved now than during the same time last year.

On the estate agent side Adrian Goslett, regional director and CEO of RE/MAX Southern Africa, says the company's reported sales figures year-to-date for August reflect that, despite having had record sales months of R2.4 billion and R3.3 billion in July and August, its total sales figure is still down by 9%.

South Africa's interest rate is the lowest in several years. Is it a good time to sell or buy?

Barker says two things drive the housing market: lower rates and good economic growth. "Therefore there is something in the market for sellers and buyers, with new buyers entering the market because it is now often cheaper to buy than to rent. Even properties that have been on the market for a while are now moving."

What goes down must go up again and therefore Barker warns that consumers who buy a new home now must ensure that they provide for interest rate increases when they look at affordability. Homeowners who can should also try to pay more than the instalment required to pay their bonds off faster and save on interest.

Buyisile Maseko, head of growth at FNB Home Finance says the pandemic has definitely caused increased financial stress for many with some consumers qualifying for less credit than before the pandemic.

"However, the housing market now offers more favourable buying conditions and we are still optimistic about the future of the property market."

The future of the housing market is not clear.

"Given the nature of Covid-19 and its profound health and economic impact, it is premature to provide a long term view of the housing market and trends, but early signs indicate that the increase in market activity is supported by a combination of pent up demand and some newly generated demand.

"We anticipate that this increased demand will be sustained as long as the buy and sell dynamics reflect the new status quo, where prices are more attractive, interest rates are low and buyers have improved affordability position. The fact that properties up to the value of R1,000,000 are exempt from transfer duties is also an attractive benefit to homebuyers, Maseko said.

"I am interested to see what trends emerge under these challenging circumstances. Based on their numbers for June and July, our partners at BetterBond remain optimistic and predict that, at worst, the rest of the year will reflect similar volumes of activity as the previous year," Goslett said.

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