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The Property Market in South Africa During and After Covid-19

Real estate investing is a hot topic among South Africans right now as interest rates are at a historic low. However, like most things in life, there are two sides to every story. Although interest rates are looking better than ever, no one can predict what the property market will do in future months. What does the property market look like after Covid-19 in South Africa?

The question on everyone’s minds – “Is it a good time to invest in real estate right now?”

The short answer is, yes. Due to the economic downfall during 2020, interest rates are at a historic low. Providing an opportunity for anyone looking to get into the real estate game or to expand their current portfolio.

However, the lockdown and effects of social distancing have had its toll on the South African economy during 2020. Making it very difficult to predict where the economy is heading to once things have gone back to normal. This will have a direct impact on the property market and the trends it will follow.

What does the current property market look like?

Due to the economic downfall during 2020, the property market has been in a decline. Although this has taken a hit on property sellers, it has offered an opportunity for investors. Especially first-time homeowners and those investors willing to play the long game.

Earlier this year, the Reserve Bank slashed interest rates down to 7%, the lowest it’s been in almost 50-years. This is a property investor’s dream and may represent a “once in a lifetime” opportunity for buyers.

Although the interests rates may change over the next few months, according to IOL we’ll be experiencing a buyers’ market for the next 18 months. So there’s no need to rush into anything, especially if you’re a first-time investor.

The current property market is perfect for first-time investors. Ooba, the bond originator, has seen a wave of first-time homebuyers with a 100% bond application over the past few months. During June of 2020, Ooba recorded 68% of loan applications with a 100% bond, of that 80% were approved.

FNB announced that they’ve seen an increase in new mortgage applications across the price spectrum and that there has been an increase on property portals compared to the beginning of 2020.

Although there has been an increase in investors to the property market, it is important to point out that the market has not seen an increase in stock volumes, when compared to “normal volumes”. This may impact the price as demand increases in the market.

However, the residential property market has been very strong since the beginning of June and July 2020, driven by realistic pricings and motivated sellers.

According to IOL, the R2.5 million and R3 million price range has seen the most activity in the residential property market.

Market changes during 2020

The property market has seen a significant increase in sales in recent months. This is partially due to the backlog of stock built up pre-lockdown, residential “lifestyle” changes from buyers, and the influx of first-time homebuyers in the market.

There’s an increase in first-time homebuyers as they move from renters to homeowners. Rather than paying someone for rent every month, these investors seek to take advantage of low-interest rates and zero transfer fees for properties below the R1 million.

First-time home buyers may be striking luck at the moment with the low-interest rates and zero transfer fees. These investors will have to ensure that they can afford the property even when interest rates increase again.

Just because you can afford a property right now does not mean you’ll be able to afford it in the future. If you don’t have a fixed interest rate on your bond, your mortgage repayments will fluctuate as interest rates change. Ensure that you fully understand how your mortgage will impact your future expenses.

Being confined to a home for the past few months has changed the way we view our living spaces.

Homeowners are now taking into account long-term living/working conditions when buying or renting a property.

Market trends have shown that investors are relocating to smaller and/or coastal towns or downsizing due to financial pressure. Some investors have taken the leap to upsize their living conditions to accommodate for the work-from-home space and for the larger garden area.

There has been an increase in the demand for homes in secure lifestyle estates. Some predict that the lockdown has resulted in an increase in separations/divorces in recent months, which may impact the demand and supply in the market.

Good News

If you’re looking to get into the property market now is a great time to start exploring your options. From interest rates dropping and the increase in loan applications approvals, you stand a chance of picking up your dream home.

Property is one of the best investments you can make. If you do your research and understand what you’re getting yourself into, you’ll be making a good profit in future years.

As we move through the lockdown levels the property market will continue to shift. So keep up to date with what’s happening before making a purchase.

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