Why house prices in South Africa could drop soon: expert
If you’re a home seller, you should absolutely not withdraw your property from the market now in the hopes of selling it at a higher price next year, says Berry Everitt, chief executive of the Chas Everitt International property group.
Everitt said the surge in buying that has been evident since June is likely to taper off towards the end of the year as more households feel the real effects of the Covid-19 economic damage, even if the Reserve Bank lowers interest rates again this year as expected.
“As we predicted, pent-up demand from the hard lockdown of April and May plus the huge reduction of home-loan interest rates this year have caused real estate demand and bond applications to rocket in the past three months.
“First-time buyers have been particularly active and as a group we had record sales months in July and August.”
Everitt said that there has also been a lot of talk about the market starting to favour sellers more than buyers as stock is absorbed and some homes even start to attract multiple offers.
And this is now leading many sellers to believe that significant home price increases are on the way and that they should hang onto their properties until next year, he said.
However, he cautions that they should actually do the opposite.
“Many of the personal and business relief measures which were introduced in April will be coming to an end soon, and that unemployment is expected to rise further as South Africa’s economy experiences the lagged effects of the colossal blow it suffered from the hard lockdown in the second quarter.
“This will cause home buying activity to stabilise again shortly and, we believe, to remain only ‘slow and steady’ for at least the next 12 to 18 months.”
Everitt said that South Africans are also set to lose out on Covid-19 relief measures such as home-loan instalment and rental deferments, levy reductions, UIF payments, UIF wage replacements and the special Sassa relief of distress grants.
“All of these will be out of the system by the end of October, and that is when we are going to see many marginal households thrown into the financial distress they may have avoided until now,” he said.
Both home loan and rental default levels can then be expected to rise, said Everitt, “and what that means is that distressed owners, the banks and distressed landlords will be bringing more stock on to the market again, at exactly the same time that the number of financially-able buyers is declining”.
“Prices are hardly likely to increase in such a scenario, and could in fact even decrease, which will create some superb buying opportunities for those who have the means to do so.”