The property market, which has already started to cool, may present good opportunities for buyers if the local and international economic environment continues, Absa said.
Overall confidence in the property market fell by 3 percentage points (pp) in the fourth quarter to 79, with economic and political instability among the strongest negative sentiment drivers, according to the Absa Homeowner Sentiment Index (Absa HSI) released on Friday.
Appetite to buy property decreased by 7pp, with only 67% of respondents considering it an appropriate time to buy property in light of the market conditions. Increasingly, people cited high interest rates as a concern across all segment groups.
“Given that the difference between buying and selling sentiment narrowed significantly due to an increase in selling sentiment and an equivalent fall in buying sentiment, if the economic situation in South Africa and internationally worsens, we should expect a further drop in demand for property, particularly in the lower-income segments," the bank said.
“This, along with the projected growth in supply in the medium term, suggested good market circumstances for potential buyers might be expected, despite the recurring interest rate hikes and growing cost of living.”
Among the Absa HSI sub-indices, only "selling" and "renovating sentiment" saw an increase in sentiment in the fourth quarter. A heightened interest in making renovations was potentially attributed to increasing a property’s value, with the intention to sell and offload.
Regionally, Gauteng and the Western Cape both saw significant declines in positive sentiment (6pp each), while KZN experienced a 3pp increase in confidence.
The bank said the decline in the homeowner sentiment index and buying sentiment in the fourth quarter was somewhat of an indication of a reduction in demand for property in the face of rising living costs and deteriorating affordability.
This was also confirmed by the sluggish growth trend of the Lightstone HPI (house price index) since the post-pandemic peak.
“Even though concerns about high interest rates and economic instability are driving more people to continue renting and delay realising their dream of homeownership, a lot of respondents still believe property is always a good investment and it is always better to own rather than rent if you can afford to buy.
“While the vast majority of investors are positioning themselves to take advantage of the growing demand for rental properties, there are growing concerns among investors that tenants can’t afford to pay rent.”
Interest rates increased by 25 basis points in January, and given the annual consumer price index (CPI) inflation fell for the second month in a row in December, the new 10.75% prime lending rate likely represented a peak of the hiking cycle, the bank said.
BUSINESS REPORT