Buy now if looking for houses

While we are not yet in a buyer’s market in the traditional sense, the market is increasingly favouring buyers in many areas, according to Samuel Seeff, the chairperson of the Seeff Property Group.

The stagnant economy and higher interest rates affected the market to the extent that there are now fewer buyers. Transactions take longer to conclude, and stock on the market is increasing in some areas, especially Gauteng and the inland regions.

Seeff said while there was no distress in the market yet, we are seeing a rise in the number of people selling for financial reasons (now about 17% of all sales).

More people are selling, intending to semigrate (about 14% of sellers) to the Cape and areas offering better services and amenities. Only about 9% are selling to emigrate.

Two key elements now favour buyers in the market. The first, he said, was the continued favourable mortgage lending conditions which were still at their best level since the 2007/8 period when the National Credit Act came into being. Seeff said the price rate at 11.75%, while notably higher than the last two years, was still below the average of 15%-16%.

Bank data further showed that buyers could still find higher loan-to-value mortgages, with first-time buyers still able to secure 100% bonds. Qualifying buyers can now get a slightly better interest rate because the banks continue competing for business in the home loans market. This we have not seen since pre-2007/8, he said.

A second important motivator for buyers was the flat price growth. House price growth trended consistently downwards for the last 18 months. According to the FNB House Price Index, annual growth averaged 2.7% in April while, a year ago, it averaged 4%.

Even at the height of the Covid property boom, growth only reached about 6% on average, although some high-demand areas experienced exceptional growth. Comparatively, global markets experienced runaway price growth of 20%-30%.

Seeff said further that, outside of greater Cape Town, price growth had been muted for over 10 years. The last time FNB reported double-digit house price growth was in 2007. This was in line with weaker economic trends over the past decade.

“The upside for buyers is that they can find property at prices notably lower than what they would have been if we had seen stronger price growth. They can find excellent value in areas like Gauteng and other inland provinces. There was little movement in the super-luxury prices above R208m and that sector, too, offers good value,” said Seeff.

The higher interest rate has put pressure on affordability, and Seeff said there were fewer buyers in the market compared with the last two years. Consequently, the demand-supply curve is shifting toward supply in many areas. We also see higher stock volumes and a lengthening time-on-market, which means sellers asking prices are under pressure.

In a seller’s market, as we experienced in the mid-2020 to mid-2022 period, there was a higher demand for properties than the available supply. There was competition among buyers because there were fewer properties and more buyers. Properties sold faster, and sellers were more insistent on their prices.

While the market turn means buyers must budget for the higher interest rate, there are reasons to get into the market now. Seeff said it was always better to buy when the market was weak. Buyers can benefit from the flat prices and potentially negotiate a better deal on the property.

Sellers, on the other hand, now need to be aware that with fewer buyers and plenty of stock to choose from, buyers can be picky and choosy. If you want to sell in the current market, your property must be in tip-top shape and offer good value to attract a good offer.