The real estate industry has resiliently adapted, and there are several key shifts and trends to watch out for in 2023 after a tumultuous few years of economic challenges and major disruption, says Yael Geffen, the CEO of Lew Geffen Sotheby’s International Realty.
The outlook for 2023 cannot be described as rosy, but it’s certainly not all doom and gloom, said Geffen.
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The CEO is cautiously optimistic for the year; however, he remains concerned about consumers’ belt tightening against unnecessary spending.
Possibly one of the most significant shifts in the property sector is the likeliness of more interest rate hikes.
“Following a record low of 3.75% in May of 2020, the interest rate has been steadily rising, with the South African Reserve Bank (SARB) raising its benchmark repo rate by another 75 bps to 7% at its November 2022 meeting – the 7th consecutive rate hike since policy normalization started in November 2021.”
“As the governor of the reserve bank, Lesetja Kganyago, recently said, the widely-held belief is that not curbing inflation will be more harmful than hiking the interest rate in the long term, so I think we can certainly expect more increases this year.”
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“And, with the goal being for inflation to be stabilised by Q4 in 2024 at 4.5%, we’re probably in for the long haul, which is a bit concerning for the market as higher interest rates mostly impact the sector that has been underpinning the market – property in the R1.m to R2.4m price band,” said the CEO.
Hiked interest rates also push up the costs associated with paying off monthly bond payments, making cash-strapped new homebuyers a bit more inclined to think twice before making big decisions.
Geffen listed the following other trends that are very likely to alter the property market in South Africa:
Virtual property shopping will remain
Buyers have started searching online for properties, and this is not going to change anytime soon. “Expect to continue seeing very comprehensive listings complete with drone footage and 3D tours as well as the continuance of virtual property tours.
More AI technology in the industry
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Algorithms can now go through millions of documents in seconds, accessing property values, debt levels, home renovations, and even some of a homeowner’s personal information. AI can even help you find the homes that are most likely to sell in the next 12 months, said Geffen.
Some of the biggest names in the business, such as Compass and Zillow are already utilising AI to help find buyers the perfect mortgage and the perfect home, added the CEO.
Bond originators will play a bigger role in mortgage applications
Rising interest rates may push more first-time home buyers to the side. As a result, third-party bond companies like Ooba will use more people to source the best financing option.
Having access to multiple lenders, an originator can provide the homebuyer with the best deal, which would include negotiating an attractive interest rate, thereby potentially saving the homebuyer thousands of rand of interest over the term of the bond.
Millennials will dominate the buyers’ market
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Millennials are the largest consumer group in South Africa and likely homebuyers in the future, said Geffen.
Whilst it’s true that first-time buyers are once again being priced out of the housing market due to factors such as rising interest rates.
Increased demand for overseas property
Globally, we are seeing increased demand for property in different countries, especially in locations like Malta, Cyprus and Mauritius, which are viewed as more favourable by investors due to the quality of life they provide, affordable property investment opportunities and, of course, favourable tax regimes.
For South Africans looking to establish their Plan B, the added incentive is that these countries also offer permanent residency.
The luxury market will retain its buoyancy
Growing substantial wealth through owning property will remain a trend for those who can.
Real estate has shown remarkable resilience over the years, defying the odds and major disruptions to become the world’s biggest store of wealth, said Geffen.
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“By the end of 2020, the global value of real estate had reached a record high of USD326.5 trillion, making it more valuable than all global equities and debt securities combined – and almost four times greater than global GDP.”
Renovations reigned in
Deterred supply chains may halt cosmetic upgrades to houses across the country under the requirements.
The solar and off-grid markets will boom
As unpopular as the ‘trend’ may be, South Africa’s growing energy crisis and ubiquitous load shedding aren’t going to disappear anytime soon, and consumers and businesses are being forced to become savvier and more self-reliant by investing in solar, wind or gas, said Geffen.
Semigration will prevail, and coastal areas will continue to boom
A major wave of semigration to the coast will continue in 2023, with many areas experiencing stock shortages and also record sales.
And, with the now-established work-from-home and safer living trends still being major driving forces in property-buying decisions, it’s unlikely that the steady migration towards lifestyle destinations will abate any time soon.
She added that although the spotlight is on the coast, there is some inland migration to Johannesburg as well.
Holiday homes will remain in trend
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Holiday homes will not only be for relaxing but also as calculated investments that can have high returns.
According to the CEO, in popular destinations like Plett, her agents are reporting that more people are currently buying holiday homes than are selling.
They have also noted a new trend – second homes being purchased to use for holidays initially but with plans to move into them permanently at some point in future, said Geffen.
Read: What a 3-bedroom house looks like in South Africa vs the UK, Netherlands and Australia
This content should not be accepted as official or professional advice.
