Property market predictions for 2022

Remarkably, within a pandemic year, the property market has experienced somewhat of a boom.

Record-low interest rates and lifestyle change resulted in an increase in buyer activity that kept the real estate market alive and thriving.

With this year at its end and with the new year in sight, regional director and CEO of RE/MAX of Southern Africa Adrian Goslett said it is difficult to predict with any kind of certainty what lies ahead.

“When we first entered hard lockdown last year, we predicted that the property market, along with everything else, was likely to crash. But, counter to what everyone in the industry predicted, the real estate market bounced back and performed better than in pre-pandemic years.

“Then hit the KZN riots and everyone predicted that the real estate market would inevitably take a knock, but again, the market remained strong and the impact was hardly noticeable.

“Now, as we prepare for 2022, I remain hesitant to make any predictions other than to say that the South African property market is resilient and no matter what lies ahead, real estate will remain a good long-term investment strategy,” Goslett remarked.

The biggest threat posed to the housing market next year is the real possibility of an ongoing interest rate hiking cycle.

“With the Reserve Bank forecasting only marginal rate increases each quarter for the next three years, there is still plenty of time to make the most of the favourable lending environment that has helped keep the property market buoyant during the pandemic,” said Carl Coetzee, CEO of BetterBond.

He added that as interest rates are unlikely to reach double digits before the end of 2023, the current climate of affordability continues to present an opportunity to invest in property.

Agreeing with this, Goslett noted that interest rates remained stable for most 2021, which is largely what caused such hyperactivity among buyers.

“I hope any interest rate hikes in the year to come will, at worst, simply bring buyer activity back to normal volumes,” said Goslett.

ALSO READ: Property Inheritance guidelines

However, Goslett added he fears buyers might not have left room in their budgets for interest rates to climb.

Here, we might see an increase in the number of homes entering the market towards the middle to end of the year as buyers become unable to keep up with the repayments on their home loans.

“This will then harm property values as supply outweighs demand,” he warned.

To prevent this, Goslett encouraged homeowners to budget carefully for the year ahead and identify areas where they can cut back should interest rates climb and bond repayments increase throughout 2022.

Another threat to the property market is the overall state of the economy.

“The housing market is closely linked to how well the greater economy is performing. Unless we see some economic recovery in the new year, we predict that the rental market, in particular, is likely to struggle as low affordability levels will continue to put downward pressure on asking prices.

“As it stands, rental markets have struggled this year and, according to the PayProp Rental Index for Q3 2021, rental growth has been minimal, measuring 0.1%, 0.3% and 0.2% in July, August and September 2021 respectively,” said Goslett.

Within the commercial real estate space, it is difficult to predict what might happen in 2022. Since the pandemic, Goslett explained many commercial real estate lots have stood vacant as corporates shifted towards a work-from-home structure.

“Some businesses have downsized their premises or given up their physical office space altogether. Whether this trend continues remains to be seen.”

The evidence of this trend can be seen in the slight increase among those who have upgraded to larger homes since 2019.

According to a Lightstone Property Report, those upgrading had fallen to 33% in 2019 and 2020, and grew to 34% in 2021, which can be attributed to ‘more people moving into larger homes which offer greater work-from-home flexibility’.

The same report also stated overall, more people are downgrading (24% in 2015 to 27% in 2021), while fewer people are upgrading (37% in 2015 to 34% in 2021). Goslett predicted unless we experience greater economic growth in 2022, this trend is likely to continue in the year ahead.

He highlighted that the above predictions are for the South African housing market as a whole but cannot account for how each micro-market will perform.

“Each suburb will have its unique trends that may or may not follow what is happening within the greater property market. The best way to know what is happening in your local market is to get in touch with your nearest real estate agent to find out what opportunities might exist for you,” Goslett concluded.

ALSO READ: Three questions to ask before you buy retirement property