For years, South Africa’s housing market has been expanding as buyers flock to the country to buy and own property. Over the last two years, sellers have been the biggest winners in the property market. Housing prices in the country have been rising, as has lending.
The prime lending rate for December 2022 was 10.5%, implying that the cost of lending will be high in early 2023. With property prices and lending so high, there appears to be no hope for lower margins in 2023, but there are still high expectations for home buyers in 2023.
When it comes to buying a home in 2023, you may have a lot of expectations. Here is what not to expect when buying a home in 2023.
What not to expect when buying property in 2023
Prices going down
Property prices are unlikely to fall in 2023. Prices have risen significantly in 2022, with property prices increasing by up to 20%. This trend is not going away in 2023, but it is expected to slow down. Property prices will continue to rise, but at a much slower rate than in 2022.
Many South Africans still struggle with affordability, as their income grows by only 8% every 18 months on average. With such small wage increases, most South Africans will find themselves unable to afford the same property they could in 2022.
The year 2023 will reveal a few things, one of which is whether or not the United States is in a housing bubble. Many experts, however, believe that there is no housing buying and that the increase in housing prices is caused by fewer houses being built with higher demand.
As the demand for housing in South Africa grows, this is unlikely to change anytime soon. Sellers will retain bargaining power because the number of available properties is slightly greater than the demand. For the market to be balanced, the number of available properties must be far greater than the demand.
Covid-19 has reduced the supply of new homes while increasing demand at the same time. With construction halted from the start of Covid-19 to early 2021, the South African housing market was disrupted, driving demand up with no increase in supply.
There are other factors to consider when buying a home in South Africa. Here are some things to consider when buying a home in 2023.
Having better negotiating power than in 2022
Properties that were under construction prior to the COVID-19 pandemic have resumed construction, with some being abandoned. The property market is once again being flooded with desperately needed properties. Construction of the new property is also underway, increasing the number of houses on the market.
With the increased supply of property in South Africa, buyers now have more bargaining power. Buyers had little negotiating power in 2022 due to scarcity in the property market, and prices were rising at the same time.
Cash buyers will have more bargaining power than in 2022. Cash buyers are preferred over finance buyers, and they had some bargaining power even during the Covid-19 pandemic. 2023 will be better for these people because they will be able to get even lower home prices.
Not all markets will be open to price negotiations because the seller will still have bargaining power. Luxury estates and high-end residences are unlikely to be negotiable. However, if you buy high-end property cash in 2023, you may be able to negotiate a lower price.
If you are a first-time buyer or want to have more negotiating power, look for houses that have been on the market for a while. However, you must proceed with caution. Examine the house’s location, property value, material value, and security features.
There are still good houses on the market that have been on the market for a while, are well-located, and are priced appropriately. Don’t avoid such properties, but make sure to hire an inspector before making a purchase.
Rate becoming stable
South Africa was widely reported to be entering a recession in 2022, but the SARB (South African Reserve Bank) never declared one. Given that we are coming off a bad year, there are high expectations for all product prices in South Africa. In 2022, fuel and general prices were increased on a monthly basis, and this will change in 2023.
Fuel prices decreased in January 2023, which is a significant plus. As we approach the middle of the year, the real estate market is expected to stabilise. The lending rate was also not in favour of home buyers in 2022, but that should change soon.
Individuals who purchased property on credit had to pay 9% or higher interest on their mortgage loans. In 2023, the repo rate is expected to fall. The reduction in the repo rate will assist home buyers who are purchasing on credit to obtain low-interest rates on their home loans.
If you are purchasing a home on credit in 2023, make sure you get the best deal possible by keeping an eye on the lending rate. Your starting point will heavily influence the amount of money you will need to repay to the lender over time.
Buying a home in 2023 will be difficult, but getting a better mortgage rate is possible. The repo rate will have a significant impact on home loans. The repo rate may rise, but it is unlikely to reach the all-time highs of the early 2000s.