Buy now, before the market turns again

Hello everyone 

With every interest rate increase, the real estate market in SA gets more challenging for homeowners with home loans to repay and for buyers trying to qualify for new bonds. 

For property sellers, it is also often hard to hear that loadshedding and a stagnant economy are keeping a very firm lid on home prices, which in most areas are likely to grow less than inflation this year - even though inflation is finally slowing down. 

The Western Cape is obviously the exception to this because for various reasons, including pretty constant semigration since the onset of Covid-19 in 2020, housing demand there continues to outstrip supply, and price growth generally continues to run ahead of inflation.

But for prospective buyers and investors in other regions, now is definitely an advantageous time to get into the market. One of the main reasons is that there is a significant amount of negative deleveraging taking place by investors who accumulated portfolios of properties - and a large amount of debt - at a different point in the property cycle.

They were obviously hoping to make better returns or profits on these properties but now, thanks to the sluggish economy and higher interest rates, returns are down while the cost of debt has risen steeply.

In fact, many are having trouble meeting their debt obligations and find themselves in the position of having to sell some of their properties at knock-down prices, rather than face the severe consequences of defaulting on the whole portfolio.

The number of homeowners who are selling and downsizing to alleviate financial distress is also rising and this not only releases more inventory onto the market but also makes most sellers more ready to negotiate, creating some really excellent opportunities for buyers and investors. 

More good news is that although the banks have become a little stricter with regard to credit qualifications, home loans are still readily available, especially if you apply through a reputable bond originator. Betterbond, for example, obtains loans for 90% of its applicants, and also gets them an average interest rate reduction of 0,61% off the current prime rate.       

Consequently, I really want to urge buyers and investors not to sit on the fence now and wait for interest rates to start dropping, or for property prices to "bottom out", because it is all too easy to miss that moment - and find that the market has already turned by the time they are ready to make a move. 

Indeed, with the monster of inflation almost under control, and the end in sight for interest rate increases, I think we are already pretty close to the bottom of this property cycle, and that now is the best time to commit, take the longer-term view and get ready to derive the maximum benefit as the property market steadily recovers again.

And recover it will. As property professionals, we have lived through this cycle several times, and seen how quickly the market can bounce back, even from some of the biggest challenges, such as the global financial crash in 2008 and, more recently, the ravages of Covid-19.

We also know from experience that the biggest "winners" are always those with the foresight and fortitude to "buy when everyone else is selling" and not wait until everyone else is also trying to buy, prices are rising and sellers are digging in their heels. Now's the time...