SA's housing market is booming – especially in Cape Town – despite rising interest rates

SA's housing market is booming – especially in Cape Town – despite rising interest rates

Roger Pettingell Sarasota Real Estate

  • The South African housing market
    experienced “unprecedented” levels of activity in the second quarter
    of 2022, according to the latest RE/MAX National Housing Report.
  • This, despite fears of an
    economic recession and rising interest rates.
  • Bond registrations recorded
    nationally were up 30% compared to the same period last year and almost 45%
    compared to the previous quarter.
  • The number of sectional
    title units sold countrywide grew by 50%.
  • Suburbs in and around Cape
    Town proved to be the most popular, leaving no room for Gauteng, which usually
    features in RE/MAX’s most-searched list.
  • For more stories go to
    www.BusinessInsider.co.za.

The South African housing market has
“performed surprisingly well” amid global fears of an economic
recession and rising interest rates, according to real estate firm RE/MAX.

South Africa’s housing market boomed
during the Covid-19 pandemic, thanks, in the main, to record-low interest
rates. More than 267,000 residential properties were sold in 2021, according to
Lightstone Property data
, with the total value of transactions nearing R280
billion, up around 30% from pre-pandemic levels in 2019.

First-time buyers, buoyed by
low-interest rates, drove the pandemic-era boom, while later purchases of
larger and more expensive homes sustained activity towards the end of 2021.

But the period of consistently
low-interest rates came to an end in November 2021, seeing a downturn in the
housing market’s activity in the final quarter of the year. Since then, the
interest rate has been climbing steadily, with inflationary pressures reaching
new highs
.

Although the housing market’s start to
the year was subdued
, activity recorded during the second quarter of 2022 has
been described as “unprecedented” in the latest RE/MAX National
Housing Report.

Close to 53,000 bond registrations
were recorded at the Deeds Office over the period April to June 2022, according
to the RE/MAX report citing Lightstone data, up 30% compared to the same period
last year and an increase of almost 45% compared to the previous quarter.

The number of transfers, both bonded
and unbonded, in the second quarter amounted to 77,880 compared to 52,241 in
the previous quarter, indicating a quarter-on-quarter rise of almost 50% and a
year-on-year increase of 32%. The number of sectional title units sold countrywide
grew by 50%.

“In the first quarter of the
year, we already noticed activity subside following the first interest rate
hike announced in November 2021,” explained Adrian Goslett, the regional
director and CEO of RE/MAX Southern Africa, in a statement on the National
Housing Report on Monday
.

“However, somewhat inexplicably,
the housing market bounced back and is now even stronger than it was last year
– and last year was already a record-breaking year for our network. In fact,
barring one month, our network’s reported sales totals are higher for every
month this year when compared against last year’s figures.”

Although encouraged by this growth in
the second quarter, Goslett noted that further interest rate hikes “will
have a more noticeable effect” on the housing market’s activity going
forward.

This increased market activity does
not equal strength for average house prices
. National year-on-year house price
inflation was at just 4.46% in the second quarter, according to the RE/MAX
report, and has decreased consistently over the past year.

Despite slow growth in average house
prices, properties in the Western Cape are still the most expensive. The median
asking price, of active listed stock on Private Property during the second
quarter, in the province, remained stable at R2.5 million.

Properties in the Western Cape
continue to draw high levels of interest and, for the first time, fill the
National Housing Report’s top-five searched suburbs list. Previously, while
suburbs in and around Cape Town were prevalent in this list, Fourways, Faerie
Glen, and Glenvista – all in Gauteng – were also suburbs of particular
interest.

In the second quarter of 2022,
Bloubergstrand topped the list of most-searched suburbs nationally, with 3,159
searches, followed by nearby Sunningdale, with 2,410 searches. Parklands came
in a close third with 2,315 searches, followed by Claremont with 2,199
searches.

“My guess as to why we continue
to see such high levels of activity is probably owing to the change in
lifestyle that the pandemic put into motion,” said Goslett, highlighting
the Western Cape as a consistently popular destination for semigration, which
surged during the pandemic-induced lockdown.

“Whether you are now working from
home and require an office, have realised the value of living closer to loved
ones, needed to downscale owing to financial constraints, or simply discovered
that you no longer like your current home, the pandemic provided many with
reasons to buy and sell property.”

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