South Africa's property market has completely shifted over the last year
Category Market News
Absa has published its Q1 Homeowner Sentiment Index (HSI), which shows the average consumer confidence level regarding the property market in South Africa.
The index shows that sentiment towards buying property has had its fourth consecutive quarter of improvement, ending Q1 2021 at 82% - the highest since the introduction of the HSI.
Sentiment towards buying, rather than renting, also reached the highest level since the introduction of the HSI, Absa said.
"Sentiment towards buying property grew faster than sentiment towards selling property for the second consecutive quarter. The rally due to the low-interest rate cycle on sentiment towards buying property has given way to property accumulating in value.
"This could be indicative of the anticipated price increases due to the widening gap between willing buyers and willing sellers," Absa said.
The main drivers for buying are that property is seen as a good investment (62%) and that property accumulates in value (49%).
The biggest negative factors are that people are under financial strain due to Covid-19 (54%) and the economy is unstable (53%).
Buying sentiment, together with observed demand, have been sustained since the latter part of Q2 2020, Absa said.
This demand has continued to be met with a mismatch in the supply of stock - initially due to would-be sellers perceiving prices to be too low to sell, but this has likely shifted to property owners wanting to ride the price increase wave to achieve better selling prices closer to the top of the cycle.
"With house prices having lagged CPI for most of the past decade and CPI having printed moderately, we will likely see a reversal of this trend with property prices likely to grow in real terms," he
"The effect of the mismatch in supply and demand on property prices over the past year was largely absorbed by available-for-sale stock."
"Stock levels have however been running progressively lower and the supply / demand mismatch will likely play out more noticeably on property prices."
Paying for more
Another observed phenomenon was that of property buyers reaching for pricier property, Absa said. To support these purchases will be mortgage loan applications at higher loan-to-values and potentially longer terms as well.
"Interestingly as well, we didn't see a deterioration in quality of the customer coming through the door, in fact the quality of customer held out coming into H2 and this enabled us to keep approval rates in line with pre-lockdown levels, thus driving the surge in registrations in the second half of the year."
Absa said that overall lending increased materially in Q4 2020 in South Africa, much of which was due to consumers taking out mortgages - and this resulted in new lending for mortgages surging to an all-time high.
"The increase would have been supported by the increase in demand for property, the shift towards more property being financed (rather than cash purchases) and higher loan-to-value deals being concluded.
"We expect to add to this mix increasing property prices in the coming months."
article courtesy businesstech.co.za
Author: Businesstech staff writer
