Our teams have seen that the market has been unexpectedly buoyant in the short-term, keeping in mind the local hinderances, as well as the geopolitical tensions caused by the Russia-Ukraine crisis.
Buyer Sentiment & Market Activity Over the past month, we have seen good traction amongst almost all of our properties for sale, ranging from the low, middle and higher end pricing segments. This indicates that there is positive buyer sentiment in the market, especially in the low and high pricing segments. The month of March has shown that the property market has remained buoyant across most pricing segments. With that said, it is important to note that our teams have indicated that market volumes have peaked, although remaining above pre-pandemic levels. Barring the international geopolitical tensions, and the recent floods in the Kwazulu-Natal region, internal market strength indicators suggest resilient market activity in the near-term.
The Rental Market Due to the geopolitical tensions and the sharp rise in inflation, our teams expect interest rates to increase by around 150bps this year. Although this is lower than most international markets, we expect this to put positive pressure on the rental market due to rising mortgage costs. Our experts have seen that there has been a reduction in vacancy rates, reducing from around 13% in the last quarter of 2020, to 9.9% in the first quarter of 2022. With the above in mind, rental escalations have increased from a low of 0.6% y/y in the first quarter of 2021 to 1.9% y/y in the first quarter of 2022. Due to the above, combined with the expected increase in interest rates and employment growth, we expect the rental market to improve. Although the stagnant labour market, rising interest rates and higher living costs suggest a less supportive medium-term environment, the early signals from the private sector suggest that there are intentions to add their employment headcount after a prolonged period of reducing headcount relative to payroll, and banks' appetite for quality lending and shifts in housing needs could mitigate this negative pressure on the market.
Time Spent On the Market In terms of how long sellers can expect to sell their properties:
The average time properties spend on the market for sale remain unchanged at 8 weeks.
The Western Cape has an average of 6 weeks, 3 days spent on the market
Kwazulu-Natal sees an average time on the market of 6 weeks, 4 days.
Gauteng records the longest time on the market at 8 weeks, 6 days.
The pricing segment that sees the shortest time spent on the market is the R1.3-R2.6m segments at 6 weeks, 4 days.
Summary Our teams expect the property market to remain buoyant in the near-term. Our teams have also indicated that they are paying close attention to the long-term buoyancy of the property market, with emphasis on the increase of interest rates this year, the status of inflation, and the international geopolitical tensions. With that said, our teams have also indicated that they expect the rental market to improve this year, opening up the opportunity for investors to receive a higher yield y/y with regards to investment properties in the lower priced segments. This will be rallied by improving employment in the private sector.
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