TO BUY OR NOT TO BUY? WHAT SHOULD YOU DO IN 2022?
Category PropertyTime
The start of the COVID-19 pandemic brought with it an incredible increase in activity in the real estate market. The low interest rates of the pandemic, alongside the surge in working from home meant that first-time homeowners were taking advantage of a strong buyers' market. With the recent announcement of an increase in the repo rate, potential buyers are asking whether 2022 is still the year to buy a home?
The answer is never quite so simple. As the old adage goes, "the best time to plant a tree is twenty years ago but the second-best time is now". Buying property is much the same: property cycles are typically long and the investment in buying a home is not going to give a quick payoff.
When you're considering buying a house, there are several important things to consider. If your debate is between buying and renting, you can read more about that in our previous blog post. There is, of course, another option: buying to rent.
When buying a property, the cost of the loan and the price of the property are the two most important considerations. A third consideration is the ability to rent the home out if you're buying to rent. In the current market, the cost of a mortgage has increased with the recent interest rate hike.
The average selling price of a home in 2022 is R1 million, significantly lower than the R1,5 million average asking price. This suggests that it is still a buyers' market in the country, although the data doesn't yet show the effects of the increased interest rate. Halfway through 2022, the country has also seen a slightly lower number of sales than at the same time in 2021, showing that the market might be shifting.
So: house prices are still good for the buyer and the number of new listings being added is staying constant, but the cost of a mortgage is set to increase. Where does that leave you on the decision of buying?
Homes are still selling faster than they used to and competition from buyers for good properties has been high. That competition is likely to decrease slightly as the higher interest rates mean that first-time homeowners are less likely to afford the higher bond repayments. Giving yourself a bit of time to find the right property should help you get a better price.
You will, however, have to pay more than you would have a few months ago. That said, the interest rate is unlikely to go down significantly in the near future - rising interest rates is a constant threat for any homeowner, and it is often quite unpredictable. Much like trading in foreign currency, you never know what could happen that will cause a sudden drop or spike in the interest rate.
If you're looking to buy-to-rent, the vacancy rates across the country depend heavily on where you are: if you're in KZN or Gauteng then you're likely to struggle to find tenants but the Western Cape and Eastern Cape continue to have low vacancy rates and strong rental markets. That said, the increased cost of living is likely to bring with it a rise in defaulting on payments, especially from low- to mid-income tenants.
In short, the cost of a mortgage might be higher now than it was a few months ago, but it might very well get higher still. If you look for a property within your budget - and allow some leeway for increasing interest rates - now is as good a time as any to buy a home, especially while property prices still favour buyers.
Author: Pierre
