real estate

House market did well in 2020, but slowed towards the end of the year

January 20, 2021

CAPE TOWN - A resilient residential property market saw a 3.5 percent year-on-year average price growth in December compared with 3.3 percent in November.

FNB yesterday said its property barometer showed that 2020 was expected to register the highest volume of mortgage approvals in over a decade despite the Covid-19 pandemic.

FNB economist Siphamandla Mkhwanazi said the pace of growth was decelerating, with overall house bond approval rates lower compared to 2019.

Mkhwanazi said activity was pushed by lower interest rates, attractive market pricing, lower transfer duties and changing housing needs due to the pandemic.

He said the impact of the pandemic was more visible on the rental than on the home-buying market.

Carl Coetzee, chief executive of mortgage origination firm BetterBond, said: “While it is impossible to predict what lies ahead, we do know people are buying homes like never before.

The year has certainly started with a bang.”

He said BetterBond had recorded its best ever December, with a 53 percent year-on-year growth in applications at a time when home buying activity was traditionally slower. There was also a 56 percent increase in grant value.

“They are not only applying for a bond, but they are able to afford 30 percent more than they would have in January last year, when the prime lending rate was (much) higher,” said Coetzee.

FNB’s Estate Agents Survey to the fourth quarter of 2020 showed that in contrast to a surge in property activity in the third quarter, which was driven mainly by middle-income segments due to low interest rates and more favourable labour market outcomes for middle-income earners, fourth quarter activity was driven by the affordable market. Mkhwanazi said this was likely due to easing of lockdown restrictions, which allowed many low-income earners to go back to work and earn a living.

However, 60 percent of agents in the “affordable” market still expected activity to increase versus 62 percent in the third quarter, while in the conventional housing market this percentage was at 29 percent from 62 percent in the third quarter.

Satisfaction levels rose in the R1.6 million to R2.6m range, likely supported by the work-from-home drive that had seen some households looking for bigger spaces. Sentiment also continued to recover in the more than R3.6m price range, from depressed levels.

Mkwanazi said market activity in South Africa last year reflected the trend of most major economies with little pandemic impact on the residential property market despite rising infection numbers and much weaker labour markets.

Apart from pandemic-induced changes in housing needs, such as for bigger space to aid work-from-home, big stimulus packages were deployed by different countries to fend off wider economic calamity that also supported housing demand, including ultra-low interest rates, mortgage-repayment holidays and tax exemptions on property purchases.

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