Are we still in a buyer's market even though home prices are rising?

The answer is yes. And no. Or maybe, depending on where you're considering buying, because market conditions can vary so widely from region to region, from suburb to suburb, and across different property types and price brackets.

As we all know in SA, supply and demand and property prices can also be negatively or positively influenced by consumer and business confidence in a certain area, new infrastructure developments or capital projects, major economic and weather events, and the performance of local government.

A good example of this is what happened in the Western Cape following a 2021 surge in semigration from Gauteng that was driven by a combination of the Covid-19 pandemic, a rise in remote working and very low interest rates. This created a very strong sellers' market in the region, which was then given further impetus by good governance compared to other provinces and by a lack of new housing development, which meant a dwindling supply of homes for sale relative to high demand.

And that resulted in prices in the Cape Town metro rising much more rapidly over the past five years than in the Johannesburg metro or eThekwini, the other two biggest SA markets in terms of the number of home sales. Indeed, according to the latest Residential Property Price Index (RPPI) from StatsSA, prices in Cape Town have risen by an average of almost 28% since 2019, while those in Johannesburg have only risen by around 9% - making it the worst performing metro in this period.

What is more, Johannesburg prices have actually shown a decline of around 1,5% over the past 12 months, compared to Cape Town's rise of almost 6%. 

The effect of this is evident in the latest available Lightstone figures, which show that while Gauteng currently accounts for 35% of all residential sales in SA, it accounts for only 37% of the value of those transactions. The Western Cape accounts for only 18% of sales but 30% of the total value of sales, and KZN accounts for 13% of sales and 13% of the value of sales.

However, this also means that those thinking of buying in Johannesburg currently have an opportunity to acquire homes and investment properties that in real terms are at or even below 2018 or 2019 prices. There is also a lot of inventory to choose from, which makes this metro a piping hot buyers' market, where the only thing keeping a lid on sales right now is high interest rates.

This is underlined in the latest Absa Homeowner Sentiment Index (HSI), which shows that overall confidence in the Gauteng property market rose rapidly from 64% in the second quarter of 2023 to 72% in the same period of this year - and that strong buying activity - and price increases - can be expected as soon as interest rates start to fall and make it easier and more affordable to obtain home loans.

Consequently, those who are able to buy should do so without delay if they want to derive maximum benefit from the current state of the Johannesburg market.

 On the other hand, those planning a purchase in Cape Town might want to wait a while. High inflation, rising prices and higher interest rates since 2022 have made it increasingly difficult for buyers to afford homes in Cape Town. Demand has tailed off accordingly, the rate of price growth has started to slow down and the market there is no longer all in favour of sellers - but it is definitely also not a buyers' market and will only become more accessible when interest rates decline meaningfully.

 As for eThekwini, it is clear that this did not benefit from the Covid-driven flight to the coast in the same way as Cape Town did, and the reason is the very negative sentiment created in that market by the 2021 riots in KZN and the disastrous floods of 2022.

This is reflected in the fact that while prices in this metro have shown an average growth of 16% since 2019, they are currently also in negative territory, having declined by 1% over the past 12 months.

The eThekwini market is thus another one that buyers should be looking at right now, along with Nelson Mandela Bay, where prices have grown by an average of 28% over the past five years but stalled and then also started to decline over the past 12 months.

Meanwhile, one also has to consider that different segments of the market, and different types of properties, can and do respond differently to various influences. So while leading originator BetterBond puts the current average national house price inflation rate at 7,5% a year, we know that prices in some estates have risen as much as 18% or 19% in the past 12 months, because of the increased consumer focus on security and personal safety, and buyers' willingness to pay a premium for access to the additional facilities that estates may offer such as backup power and water supplies as well as on site sports, wellness, entertainment and business facilities.

Similarly, freehold and sectional title prices can move very differently, even in the same city. The RPPI shows that in Buffalo City, for example, freehold property prices rose by more than 8% in the 12 months to end-March, but that sectional title prices rose by an average of only 4%. However in the same period, Cape Town, Tshwane, eThekwini and Nelson Mandela Bay, all saw sectional titles outperform freehold properties.

Over the past five years, though, freehold price growth has exceeded sectional title price growth by a considerable margin in every metro except Mangaung, which only serves to emphasise that there are many different markets within the overall real estate sector, and that they make up a constantly shifting, highly nuanced environment that home sellers, buyers and investors should not try to navigate without a knowledgeable and experienced property professional as their guide.