This year, almost half of the world's inhabitants will head to the polls to elect their new governments, including 8 of the world’s 10 most populous countries.

"In South Africa, we can expect our own election to put the property market into a temporary holding pattern, dragging on the subtle buyer’s market we have been experiencing" says Renier Kriek, Managing Director at Sentinel Homes.

While he advises owners to wait until the end of the year to consider selling their property, Kriek cautions buyers to not get caught up in election fears and miss out on real estate bargains.

The impact of sentiment
All market behaviours are driven by sentiment. South Africans face uncertainty around the outcome of the election and the likelihood that, for the first time in its history, the country will be led by a coalition government at the national level.

This creates negative sentiment that is also being fuelled by the heightened and increasingly populist rhetoric of competing political parties. And persistent factors, like the delay in interest rate cuts and a declining rand, only add to the doubt.

"While we were all hoping for a downturn in the rate cycle at SARB's May or July meeting, I now doubt anything will happen before September. The MPC remains hawkish and seem unlikely to move interest rates down before the US Federal Reserve has lowered their policy rate," says Kriek.

That's expected well after the election and these compounded concerns are pushing people to take a wait-and-see approach, including in the buying and selling of property.

A first for South Africa
All countries with a proportional representation electoral system eventually face a coalition government scenario. The likelihood of a national governing coalition is therefore a sign that our political system is maturing.

This will be South Africa's first coalition government at a national level and the norms associated with such a structure have never been firmly established among the political class or the voting population. While national coalitions are a sign of progress and maturity, it is likely to lead to a lot of short- to medium-term noise, that is likely to have a continuing and unpredictable impact on sentiment in all markets, including the property market.

The nearest we have to some agreement is the Multiparty Charter whose only purpose is to counter a national coalition between the ANC and EFF.

Countries like Belgium with older proportional representation systems have developed the advanced bureaucracy necessary to almost run the country on autopilot, even without a government. South Africa, however, still needs to find its footing in any coalition pacts and develop the necessary protocols among participants intent on promoting their own interests.

"This means things will probably be noisy and messy for some time after the election, as parties attempt to nail down the terms of their respective alliances," says Kriek.

What to expect from property
Currently, it's still a buyer's market for property and it definitely won't turn into a seller's market until after the election and a rate cut. Until then, we can expect that property price growth will remain low. Once the election outcome is known, and provided we have avoided worst-case scenarios, and the rate cut is at hand, we can expect pent-up demand for property to spill into the market and significantly increase demand.

In addition, weak economic growth means sellers who can afford to wait should indeed wait until spring or summer to see if they can fetch a good price for their property relative to the market. Winter is historically not a great time for selling homes anyway.

Despite the general modd brought on by politics and the interest rate cycle, the market in the Western Cape remains buoyant and there are signs of buyers returning in earnest to areas like southern Gauteng and areas eastof Pretoria.
The smart money of property investors also remains in the market, signalling that opportunities exist. Along with low property price growth, this means that astute buyers can still pick up bargains while others hesitate.
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"If you want to buy, buy now and don't be put off by sentiment-driven hesitance that currently prevails in the market election sentiment," advises Kriek. “In the South African property property market, due to structural factors, what goes down must eventually come up.”
 
ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za 
 
For more information on Sentinel Homes please visit:
Website: www.sentinelhomes.co.za
Facebook: Sentinel Homes

The local property market will see a resurgence in 2024 predicts Renier Kriek, Managing Director at Sentinel Homes.
 
"People have been held back from buying and selling property by various factors since before the COVID lockdown, but that is about to change for the better," he says.
 
Factors impacting the local property market
In South Africa, property buying and selling have dropped steadily since 2021. In 2023, market volume was about 5% lower than 2019.
 
The factors driving this decline include load shedding, the national logistical backlog, a stalling economy, runaway inflation, the rising cost of living, and a 475 basis point increase in the lending rate since the COVID lockdown ended.
 
However, people's life circumstances continue to change, suggesting pent up demand building below the surface.
 
The number of first time buyers – a solid indicator of market demand – has also decreased significantly, again implying that unsatisfied demand exists.
 
Outlook for 2024
Two main events signal that things are about to change.
 
First, economists agree that, as inflation slows in South Africa, SARB will likely reduce the interest rate at its May or July National Planning Commission meeting in line with the US Fed.
 
Second, the country will hold general elections this year, and probably be led for the first time by a coalition government at national level. While this might concern South Africans, it also promises to bring new energy to solving the nation's dilemmas.
 
Kriek believes both these events will turn out well and will provide a release for the evident demand for property. "Then, we'll see a dramatic increase in market activity," he says.
 
Several lesser trends are also worth watching.
 
Smart money in the market
Right now, there's a lot of smart money in the market – entities that buy properties to boost their portfolios, not their lifestyle.
 
Interest rates on mortgage loans have decreased significantly, partly because banks are competing for a shrinking market, but also because these investors are richer, have better credit records and present a much lower risk than the average buyer. They are also paying higher deposits up to 105 percent.
In the same vein, wealthy buyers from abroad are snapping up luxury properties in Cape Town above R20 million.
 
This trend is sure to continue into 2024 as that smart money looks to acquire more assets before the market turns.
 
Semigration
Semigration remains a major trend in 2024 and smaller towns will continue to be targeted for gentrification, no longer only in the popular Western Cape but across the country.
 
As more affluent buyers seek stock in these locations, incumbents will see their property value rocket.
 
This may not be the only incentive for them to sell, though. Increases in rates and the cost of living may become unaffordable for them, pressuring them to move elsewhere. But where will they go?
 
With more than 80 percent of all building plan approvals being in coastal areas currently, the answer is plain to see.
 
Co-buying
There is a marked increase in co-buying, that is, people buying a property together with someone other than their spouse. This includes friends, unmarried couples, investors and those with business intentions. About one in every four properties purchased is now co-bought.
 
This approach overcomes the gap between property prices and income, and is a way for younger people to enter the market while spreading risk between them.
 
Banks have also changed their policies to accommodate co-buying, with some allowing up to 12 individuals to join in the application.
 
Buy-to-let boom
The buy-to-let market is booming, especially in the Western Cape. One reason is that, due to insufficient stock and higher property prices at the coast, many semigrants rent while they shop around for an affordable property or while their new home is being built.
 
This growing demand provides a good incentive for buy-to-let landlords to invest in new homes and apartments, despite the high construction costs.
 
Almost 11% of all bond applications are currently investment purchases.
 
Smaller properties
Another continuing trend in 2024 will be smaller plots and smaller properties.
 
High construction costs make it very difficult to create new stock that competes with existing stock in the market.
 
So, both tenants and buyers will have to adapt to reduced living space unless they can afford to build their own at a premium.
 
Relief for homeowners
The number of buyers may be low but owners are also holding onto their properties for dear life, in the face of crippling interest rates.
 
Unfortunately, foreclosure may have forced some to sell. Yet, the predicted drop in interest rates promises relief to those who managed to stay afloat.
 
It could also mean an influx of buyers for anyone who desperately wants to unburden themselves of their property.
 
When will the change happen?
Kriek expects the dam to break in the coming winter. This is not a prime time for property sales, however, especially in the Western Cape. During this season, people tend to buy fewer properties or buy them at a reduced rate.
 
"With lower transaction volumes during the winter months, there is likely to be a slight buyer's market that will turn to a seller's market in spring," he says.

 
ENDS
 
MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za 
 
For more information on Sentinel Homes please visit:
Website: www.sentinelhomes.co.za
Facebook: Sentinel Homes

South Africans who have been hesitating to buy a new home due to high interest rates may finally be able to take the plunge.
 
"For the first time since April 2022, the Consumer Price Index (CPI) has fallen back within the Reserve Bank’s target band of between 3-6 percent," says Renier Kriek, Managing Director at Sentinel Homes.
 
According to Kriek, a lower CPI indicates that inflation has potentially peaked. This will likely mean stabilization of the market interest rates and a repo rate reduction could even be on the way.
 
Signs that inflation is falling
Since the disruption to world economies caused by COVID-19, several factors subsequently contributed to high global inflation, from which South Africa was not spared.
 
Inflation often occurs because the difference between consumer demand for items and producers' ability to supply them causes their prices to increase too sharply to remain affordable. It may also result from a drop in the relative purchasing value of money due to various economic factors. Inflation in South Africa is measured through the Consumer Price Index (CPI) compiled by Stats SA.
 
The South African Reserve Bank (SARB) follows a policy of keeping any changes in the CPI within a range of 3 to 6 percent year-on-year, preferring to keep it anchored at 5 percent.
 
Even before local CPI breached 6 percent earlier last year, SARB moved to reign in inflation with 10 consecutive increases in the repo rate, to the current level of 8.25 percent.
 
Interest rates consumers are charged on their debt, such as the prime rate, are linked to the repo rate. This means that rises in the repo rate makes repayments on debts like home, car and personal loans more expensive, forcing consumers to curb non-essential purchases and bringing rampant price increases down.
 
However, on 21 July 2023, the SARB's Monetary Policy Committee announced the repo rate would stay unchanged at 8.25 percent, saying it remains cautious. The main reason a further increase was avoided is the drop in the CPI from almost 7 percent in April to only 5.4 percent in July. The July CPI was even lower than what economists predicted.
 
"For consumers, this means that, barring unforeseen increases in inflation, the repo rate will remain steady and might even be reduced in September, when the Committee meets again," says Kriek.
 
Are there homes to buy?
The South African economy created 1.2 million new jobs between the first quarter of 2022 and the first quarter of 2023, despite challenges like inflation, loadshedding and poor service delivery. If the repo rate drops as expected, this will put even more money in people's pockets and boost economic activity.
 
In short, things are looking up for South Africans, especially those with their hearts set on buying a home.
 
Although estate agents report a shortage of stock from resilient homeowners desperate to keep their properties, home loan debtors are clearly facing heavy stress from current high interest rates.
 
The National Credit Regulator reports that while the number of mortgages not in arrears are usually around 91 percent of total home loans, the first quarter of 2023 saw a drop to 88.85 percent. The arrears rate has steadily increased as interest rates climbed higher.
 
"Banks will likely be eager to help owners in arrears with payments start the process of selling those properties, meaning we are likely to see increased stock coming onto the market soon,” says Kriek. “The normal stock cycle in the property market will also return if sellers see positive signals, such as stagnation or decline in interest rates. Until that time, sellers are likely to hold out on selling as much as they can to avoid being price takers.”
 
Is it time to buy?
Of course, the best time to buy depends on various factors and conditions, changing from region to region, case to case and price range to price range.
 
However, Kriek says for anyone set on semigrating from the northern provinces to the Western Cape or elsewehere on the coast, the time is ripe to buy and they should not wait.
 
Properties selling against home loan debt typically carry an average sales value of around R1.3 million. Properties at this price point and anything below the average price have seen and will continue to yield a respectable return on investment. “Demand very clearly outstrips supply for properties priced below the average,” says Kriek.
 
The exception is properties in the very high range, above R4 million. "I see evidence that prices will come down further so it may be best for prospective buyers in that price range to bide their time until the market bottoms out,” says Kriek. “Of course, there are exceptions, such as Sea Point or Stellenbosch.”
 
Lastly, Kriek advises that, with interest rates having peaked, purchasers should opt for a variable interest rate instead of a fixed interest rate. "Homeowners taking advantage of the eventual drop in the repo rate can enjoy their property while reducing their bond repayments," he says.
 
ENDS
 
MEDIA CONTACT: Rosa-Mari Le Roux, [email protected], 060 995 6277, www.atthatpoint.co.za  
 
For more information on Sentinel Homes please visit:
Website: www.sentinelhomes.co.za
Facebook: Sentinel Homes