A Record Year As Seeff Looks At What Is Ahead For Property In 2022
Speaking at the recent REI-Rode Property Investment Virtual Conference 2021, Samuel Seeff, chairman of the Seeff Property Group said the residential property market remains the “good news” story of the economy and continues to support the post-pandemic recovery.
There has been very little sign of a bust and it has been more of a boom since mid-2020 and we expect more of the same into 2022. For Seeff, this year has in fact been our best sales year in our 57-year history, he says.
We have achieved a notable uptick in high-value sales, largely in Cape Town’s Atlantic Seaboard and Southern Suburbs where we have clinched several high-value sales ranging to R45 million and R65 million as well as in Zimbali and sales in Plettenberg Bay ranging to R60 million. We have also picked up notably in the international market.
Seeff says the residential property market has continued to surprise on the upside. The low-interest rate and favourable mortgage lending has been a game-changer. Even with an anticipated 25bps rate hike, Seeff says it remains at a near five-decade historic low and a major incentive for buyers.
Additionally, mortgage loan granting is the highest since the introduction of the National Credit Act in 2007. This means faster turnaround times, higher loan-to-value ratios, bigger rate concessions and the lowest deposit requirements for buyers.
In fact, he says 41% more home loans were granted by the first quarter of 2021 compared to 2019 according to the National Credit Regulator (NCR). The market has been a boon for first-time buyers, especially who comprise well over half of all mortgage loan applications.
Property Versus the Pandemic
As we now know, there has been no realisation of the “gloom and doom” predictions of the market or prices collapsing. On the contrary, he says the market continues to surprise on the upside and while transaction volumes and price growth has moderated following the buyer-frenzy of the second half of 2020, it remains robust with sustained demand in most areas.
While house prices initially rallied to double-digit growth last year, we have seen it slow to around 4% to 5%. Although we would have expected higher growth given that the rest of the world is experiencing a house price boom with growth of up to 16.5% in the USA and 23.9% in Sydney, Seeff says the steady flow of new stock onto the market means that asking prices remain under pressure.
86% of all transactions still fall below R1,5 million with the bulk (52%) below R700,000. Seeff says despite the good news that there is a notable increase in applications for higher bonds, especially in the R2 million to R3 million range, only 14% of sales fall above R1,5 million with just 2% thereof above R3 million.
Nonetheless, we have seen the monthly transaction volumes recover to around 21,900 per month which, he says, takes the market back to the 2019 pre-pandemic level and is only about 7% below 2015 to 2018 average.
While the top end of the market remains a story of few and far between, Seeff says it is encouraging that there has been an uptick in sales above the R5 million to R10 million mark in the upper-end areas and a substantial rise in R20 million-plus sales, although primarily in the Cape.
Generally, the market has shown that despite the economic uncertainty buyers have continued to take a more serious approach to homeownership and the desire for a better quality of life. Seeff says the result has been a considerable shift in buying patterns. Aside from the higher ratio of first-time buyers, the WFH (work from home) trend has shifted demand from urban to suburban, estate, and coastal area homes.
Semigration, emigration, and remote working are the big trends driving the market and comprise about 30% to 40% of buyers in some areas, he adds. We have therefore seen higher demand for second homes and the Zoom-town trend which continues in the market as people look for better surroundings with buyers often paying upwards of R20 million to R60 million for a top-end estate or coastal home.
We have also seen higher demand from foreign buyers and SA expats investing predominantly in coastal areas such as the Atlantic Seaboard as they look to escape the confines of the pandemic. The result is a considerable spike with sales up by 160% compared to 2020 and 40% higher than the 2019 pre-pandemic period. The demand is driven predominantly by buyers from the UK and Northern Europe but from many other countries including the USA.
More Of the Same Expected in 2022
The economy has been better than expected, but Seeff says the resurgence of Eskom blackouts, drastic petrol price hikes, rising inflation, and premature interest rate hikes could slow economic growth. Naturally, a weak growth environment could negatively impact the housing market.
Our current outlook, however, is that positive and we expect more of the same into 2022. The market will remain well-balanced, largely favouring buyers. We expect a steady pace of sales and buyers who will continue capitalising on the low-interest rate and favourable mortgage conditions.
Those with discretionary buying power hold the key to further growth in the market, but they are likely to continue their discretionary stance as they wait and watch what unfolds politically and economically, he says.
In spite of stock shortages prevalent in some areas and price bands, we expect the steady pace of new listings to continue. The key to success for sellers will be market-related asking prices which will mean a faster sale and higher selling to asking price ratio. This is especially important in the higher price bands.
Buyers though will need to be prepared to act quickly, especially in the lower price bands and high-demand areas where there is no shortage of willing buyers looking to capitalise on the favourable market conditions while they still can.