Africa-Press – South-Africa. It is highly likely that real house prices in South Africa will decline for the seventh consecutive year in 2022, and continue to decline for another few years to come, according to a report by independent property valuation firm Rode & Associates.
According to the report, the housing market had a steady start in 2022, with nominal prices (not taking inflation into account) in the first two months growing by 3.8% year-on-year – slightly slower than the 4.2% growth for the full 2021.
However, in real terms (taking inflation into account) house prices fell by about 2% so far in 2022 as inflation held steady at 5.7%.
The picture for real house price growth is not rosy, says Erwin Rode, CEO of Rode & Associates. The property cycle is very long – 15 to 20 years, maybe even longer.
“We are about halfway down this path of declining house prices in real terms and there is still a stretch to go,” says Rode.
Consumers are expected to face increased financial pressures, with rising interest rates impacting property purchases. There will also be rising mortgage defaults in some instances, and some owners having no option but to sell. The prime lending rate in March 2022 rose to 7.75% – up from pandemic lows that favoured property buyers.
“Slower house price growth was expected, given the fading impact of low interest rates amid record-high unemployment and an economy that is struggling to get back to pre-pandemic levels,” says Rode.
“Mortgage rates will be higher for the next few years – because globally interest rates are normalising due to global inflation after being very low for a while,” he adds.
In the fourth quarter of 2021 houses were, on average, on the market only about eight weeks – the lowest since the pandemic started and well below the long-term average of 13 weeks.
“When houses are on the market for a shorter time, it means sellers have become more realistic in their expectations,” says Rode.
First-time buyers made up 31% in the fourth quarter of 2021, but the report expects higher interest rates, coupled with higher inflation, are starting to have a dampening impact on demand from these buyers.
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