It seems almost counter-intuitive to say that 2021 looks set to be a bumper year for the housing property market, given the challenging few months we have just experienced. But overall, it has been a surprisingly good year for the property market with five consecutive repo rate cuts taking the prime lending rate to a record low of 7%, the lowest in five decades. The forecasr for the next 12 months looks positive, with several key trends expected to gain momentum:
1. We expect more young, female investors to enter the
property market. Data from TPN shows that the average investor in South Africa
is female and in her early twenties to mid-thirties. FNB repo‑ s that the
market recovery in the R750 000 to R2 million price band is being driven
by this demographic - mostly first - time buyers younger than 35.
BetterBond’s average deposit required by a fir -home buyer dropped by 18% in
October, year on year, meaning that less finance is needed upfront to secure a
home. The amount required as a deposit for a bond has dropped across all price
bands, with the average deposit for homes of between R1 million and R1.5
million coming down by 24% year on year, and dipping by almost 17% for bonds
of between R500 000 and R1 million.
2. A growing preference for online bond applications as
buyers take control of their home buying journey. The increased appetite to
apply for a bond, given the favourable interest rates, has seen buyers wanting
greater control over their application process. This has resulted in the
increased use of digital platforms that allow the user to control the application
process end-to-end, rather than sending their documents through and waiting for
feedback. As more buyers continue to make the most of the low interest rate,
we expect to see more applicants making use of our digital platforms. BetterBond’s
application volumes were up 32% year on year in November, and this strong
activity is set to continue as the South African Reserve Bank’s forecast shows
that the repo rate is likely to gradually increase towards the end of 2021.
3. Fir -home buyers will continue to drive the property
market’s recovery and resurgence. More than 70% of BetterBond’s applications,
since June, have been fir -home buyers making the most of the favourable interest
rates. Instead of tapering off, as the prime lending rate has stabilised at 7%
with no further repo rate cuts since September, there has been an almost 17%
year-on-year increase in first home buyer applications. We expect this
trajectory to continue well into 2021.
4. Semigration to coastal areas and smaller towns as remote
working changes the way we live. Light one property data notes that house
prices in the Eastern Cape, Kwazulu-Natal and Mpumalanga have been growing at
increasing rates and they now top provincial growth with house price inflation
currently above 5% per year. KwaZulu-Natal enjoyed the strongest house price
growth in November, year on year. Nelson Mandela Bay is the leading metro
market for the year to date, outperforming in terms of house price inflation at
5.6% for the year. This is well above the national average of 2.5%. BetterBond
has seen an increase in bond applications across all regions compared with the
same period la year. Bond applications are up 11% in KwaZulu-Natal, compared
with this time la year, while in the Eastern Cape, bond applications have
increased by 13%.
5. Increasing home values in all price bands with a particular
interest in areas that are close to transport, work opportunities and schools.
House price growth in the R2 million to R3 million band is strengthening, while
the so-called luxury market, of R3 million upwards, will continue to be
sluggish. BetterBond has seen an 11.7% year on year increase in bond approvals
for homes of R2.5 million and R3 million, and an 11.3% increase in approvals
for bonds of between R2 million and R2.5 million. While national house price
inflation will continue to slow, there will be some growth in the lower to middle
price bands, as demand increases. The freehold housing market, referring to
properties where the buyer owns the land and the house, will continue to outperform
in terms of house price growth, possibly as the lower interest rate means that
buyers can now afford 30% more than they could in January, when the prime
lending rate was 10%. Also, buyers are prioritising quality of life after
months in lockdown, and properties that can offer a garden and space for a home
office, may mean that freehold properties are more appealing.
6. Developers will ramp up supply to meet the increased
demand from the next generation of buyers. There are no transfer duties payable
on a property in a new development, making them ideal for fir -home buyers.
The average bond size currently approved by BetterBond is just over R1
million, which is the price point at which many new developments are coming
onto the market. The large po‑ ion of BetterBond’s bond approvals - just over
40% - are for homes priced between R500 000 and R1 million. With the current
low interest rates, it’s possible to buy a property in an area that is guaranteed
to have a positive rental yield, creating oppo‑ unities for the buy-to-let
market. According to TPN, 87% of the invest or market own two to four properties,
so we expect to see more buyers adding to their investment portfolio in the next
12 months.
7. Interest rates will remain in the single digits - and
probably below 8% - throughout 2021. The South African Reserve Bank has
indicated that there will be no repo cuts in the short term, and potentially
two increases of only 25 basis points in the third qua‑ er of next year. There
is ill ample opportunity to make the most of the favourable lending rate -
2021 will still be a good year to bond.
Anne-Marie Bamber is Norgarb Properties dedicated Home Loans Consultant. She has over 15 years’ experience in assisting clients with their Home Loan needs and has placed many happy families in their dream homes.Contact her today for no cost stress-free home-buying.
Anne-Marie Bamber
Home Loans consultant
Tel: +27 (0)21 851 3568 | Fax: +27 (0)21 441 1494 | Cell: +27 (0)82 071 1665
E-mail: anne-marie.bamber@betterlife.co.za
