PROPERTY NEWS - 2022 has been yet another record-breaking year for the local real estate market, with high sales volumes being recorded for almost every month. 

Following this period of hyperactivity within the housing market, most experts predict that we will be heading into leaner times this year.

"Housing market performance is intrinsically linked to the broader economic circumstances. While it is impossible to say with any certainty what lies ahead, all signifiers currently point to 2023 being a year of slowed growth," says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

In the November MPC statement, the SARB's forecast for global growth in 2023 was revised lower to 1,9% (from 2,0%). The International Monetary Fund's (IMF) October's forecast for global growth in 2023 was 2,7%. Largely owing to increased load-shedding, the SARB also forecast that the South African economy would expand by just 1,1% in 2023 (from 1,4%). They also forecast that core inflation would be higher than previously expected at 5,5% (from 5,4%) in 2023, and core goods price inflation was forecast higher at 5,7% for 2023.

The SARB also alluded to the possibility of further interest rate hikes by stating, "Economic and financial conditions are expected to remain more volatile for the foreseeable future. In this uncertain environment, monetary policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook."

Unless inflation begins to ease off following the latest 0,75% bump, Goslett predicts that we are likely to experience further interest rate hikes, probably not as severe as previous hikes but somewhere between 0,25% and 0,5%. "I also predict that banks will start to fight harder to offer better pricing to clients on interest rates."

Goslett says that affordability is likely to become more of a concern for many homeowners, especially for those who bought when interest rates were at record lows. "Rising inflation will make it challenging to keep up with the monthly expenses. On top of this, debt has become more expensive with every interest rate bump. Prime was just 7,5% when we started 2022. That means that interest rates have grown by 3% over the course of the year, which would have potentially added thousands of rands to homeowners' repayments (depending on the size of their home loan)," he remarks.

"In my opinion, buyer demand will probably drop as a result of the tougher economic conditions we are likely to experience in 2023. The number of property sales (units) could drop by around 10%. The market activity might shift back towards the rental market, which could be beneficial for landlords. However, owing to the challenging economic climate, rental prices (and house prices, for that matter) are unlikely to show any substantial growth in the year ahead. House prices are likely to grow only by roughly 4% nationally."

However, Goslett highlights that there are opportunities to be found in any market. "It is useful to remember that interest rates are still relatively manageable at this point in time and are nowhere near the prime lending rate of 25% that we experienced at the start of 1994. Although the higher interest rates do make it more expensive to purchase property, when a well-priced home hits the market, you want to be sure you can afford it.

"My advice is to try and put yourself in a position where you carry as few bad debts – credit cards, car loans, and the like – as possible. That way, you free yourself up to be able to seize any opportunity to generate future wealth that may come knocking at your door in the year ahead."

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