Tips for prospective home buyers in South Africa in 2023
Category Industry News
South Africa's property market is starting off in a seller's market, and property expert Grant Smee says that putting up a decent deposit and pricing in interest rate hikes is essential for prospective home buyers in 2023.
Buying a property during high inflation can be challenging, especially in South Africa, where interest rates are sitting above the South African Reserve Bank (SARB) 's target range due to a turbulent 2022.
Nedbank chief economist Nicky Weimar noted that during last year, inflation gradually decreased to 7%.
The recent petrol and diesel price this month has bought it down further to 6.8%. However, this is still too high and sits outside the Reserve Bank's target range of 3% to 6%.
High inflation affects the value of a property and makes it more difficult to afford a home. However, with the right approach, it is still possible to make a successful property purchase during high inflation.
Addressing current and coming property trends in an interview with CapeTalk, Only Realty Property Group's managing director Grant Smee said that the group has noticed many South Africans are either upgrading or downgrading to homes in the mid-tier market of between R1.5 to R2.5 million.
"Many home buyers are now focusing on the quality of the property and what that property offers in terms of lifestyle rather than the conventional market standards such as the focus on the area or suburb, for example," He said.
Smee also mentioned that, while there was a noticeable move out of city centres to more coastal areas during the Covid-19 pandemic and the emergence of hybrid work models, the majority of South Africans have returned to the office, and there has been an influx of those looking for property closer to work.
"There is a noticeable demand for properties close to commercial areas, and a major reason for this is the conscience of commuting," he said.
Smee's advice for prospective home buyers in South Africa to increase the chances of finding the perfect property suitable for them are:
- Get pre-approved for a mortgage. Before you start looking at properties, getting pre-approved for a mortgage is a good idea. This will give you an idea of how much you can afford to spend and will make the buying process smoother.
- Price in interest rate hikes. When buying a property, look to buy at 70% to 80% of your affordability so you have a buffer for potential increases in interest rates, costs of ownership, rates and taxes, and levies. The SARB hiked interest rates by 25 basis points in January, with another 25 basis point hike expected in March.
- Work towards having a deposit of a least 10% to 20% to soften the repayment. This comes down to your financial capabilities and overall budget. Still, Smee suggests those struggling to find the money to try decrease high-interest loans such as credit and vehicle financing and move that money towards the mortgage. Smee added that if you find money to be too tight at the moment, and buying a property seems to be too much of a stretch, its okay to set back a little bit longer and continue renting - taking advantage of the lower cost of renting while you save for the deposit.
Author: Mathew Bessesen
