Which Market Segment is the most Active in South Africa?

Category Property Talk

We hear all kinds of anecdotal stories from our clients that tend to reflect their personal attitudes or understanding about the property market. It can often be quite a subjective discussion without looking at the facts. I am fortunate enough to receive sales information from our entire group every two days, and this real time data paints a very clear picture about what is happening in the South African market. 

It's pretty clear by looking at the top performing markets, that the middle-income sector between R700 000 and R1.8 million is the most active. Deeds office data shows that over 80% of current property transactions fall below the R1.8 million mark although it comprises less than half of the total value generated in the market. To be more specific, in the year to date, our Pretoria East branch, which is placed second in the group, currently has traded close to 300 properties at an average price of R1.7mill. Randburg, sitting in fifth position has sold 231 properties at an average of R1.57 million. The sixth placed Southern Cape has sold 233 properties at an average price of R1.3 million. Closer to home, our Richard's Bay branch has had an excellent year so far, and in tenth position has sold 213 properties at an average price of R1.1 million. These markets have performed comparatively far better than our traditional powerhouses operating in the more affluent markets, and it shows a definite shift.

Interestingly, our Seeff North Coast office which is in seventh position, has sold 85 units so far this year at an average price of R3.3 million. Our unit numbers are significantly lower, but due to the average price per property being markedly higher than that of the abovementioned branches, we have managed to still gain traction and grow in tough conditions. It's important to note that our area is one of the most desirable investment and lifestyle destinations in South Africa right now and has outperformed other similar destinations like Hermanus and Plettenburg Bay which, from a period of significant growth, have been somewhat quieter in the past 12 months.

So if you're an urban seller in the lower price brackets, it's pretty good news, but what might be driving these trends? It seems that the biggest boost for the middle-income sector has been the much improved mortgage lending climate and that current bank approval rates are simply unheard of in recent times and we are seeing the best loan-to-value rates since 2015. Buyers who are still wondering whether it's a good time to buy should really make their move because we don't know how long this phase will last.

Ooba recently reported its bond approval rate at 83.4% which is 3.4% higher compared to the same time last year with 91% of banks now granting loans within 5 days. Deposit requirements are down to around 10%-11%, but first time buyers are often able to find a better deal.

As a further boost to this sector, various banks have launched mortgage products for degreed professionals. The most recent is ABSA who is offering 105% bonds to a maximum price of R1.5m to first time buyers with a 4-year degree at NQF level 8 or higher. The additional 5% is to cover transfer and registration costs and there is a discount on attorney bond registration costs (restricted to the ABSA panel) along with various additional benefits.

It's safe to say that it's definitely the best time to buy in years. The interest rate has remained favourable while the weak house price growth, generally still below the CPI inflation rate, means that prices have remained fairly flat over the last two years supporting affordability which is so important to this sector of the market.

Author: Tim Johnson

Submitted 31 Oct 19 / Views 155