Pointers for potential South African home buyers In 2023

South Africa’s property market is now in a seller’s market, according to property analyst Grant Smee, and putting down a substantial deposit and factoring in interest rate rises is critical for prospective house buyers in 2023.

Purchasing a home at a period of high inflation can be difficult, particularly in South Africa, where interest rates are over the South African Reserve Bank’s (SARB) target range owing to a tumultuous 2022.

Nicky Weimar, chief economist at Nedbank, remarked that inflation progressively fell to 7% last year.

The latest drop in gasoline and diesel prices this month has brought it down to 6.8%. Nonetheless, this remains excessive and falls below the Reserve Bank’s goal range of 3% to 6%.

Excessive inflation reduces the value of a home and makes it more difficult to purchase one. But, with the appropriate technique, a successful home acquisition may still be made during a period of excessive inflation.

In an interview with CapeTalk, Only Realty Property Group’s managing director Grant Smee stated that the business has witnessed many South Africans upgrading or downgrading to properties in the mid-tier market of between R1.5 and R2.5 million.

“Many home buyers are now focusing on the quality of the property and what that property offers in terms of lifestyle rather than the conventional market standards such as the focus on the area or suburb, for example,” He said.

Smee also stated that, while there was a noticeable shift away from city centres and towards more coastal areas during the Covid-19 pandemic and the rise of hybrid work models, the majority of South Africans have returned to the office, and there has been an influx of those looking for property closer to work.

“There is a noticeable demand for properties close to commercial areas, and a major reason for this is the conscience of commuting,” he said.

Smee’s tips for potential South African house buyers to boost their chances of discovering the appropriate property for them are as follows:

• Get pre-approved for a mortgage. Before you start looking at properties, getting pre-approved for a mortgage is a good idea. This will give you an idea of how much you can afford to spend and will make the buying process smoother.
• Price in interest rate hikes. When buying a property, look to buy at 70% to 80% of your affordability so you have a buffer for potential increases in interest rates, costs of ownership, rates and taxes, and levies. The SARB hiked interest rates by 25 basis points in January, with another 25 basis point hike expected in March.
• Work towards having a deposit of a least 10% to 20% to soften the repayment. This comes down to your financial capabilities and overall budget. Still, Smee suggests those struggling to find the money to try decrease high-interest loans such as credit and vehicle financing and move that money towards the mortgage. Smee added that if you find money to be too tight at the moment, and buying a property seems to be too much of a stretch, its okay to set back a little bit longer and continue renting – taking advantage of the lower cost of renting while you save for the deposit.