Cape Town Property Market Outlook - 2022
Category Cape Town Property Market
The Cape Town property market has got off to a flying start with purchaser activity up by more than 30% compared to the previous year. Increases in activity levels have been prominent in most segments of the market, including residential sales, rentals and perhaps surprisingly, commercial properties. Commercial property activity in key locations has been driven by raised demand in the new year which is indicative of businesses getting back on track after the peak of the pandemic.
Some of this renewed positive sentiment is as a result of a culmination of factors, namely; the currently low-interest rate environment, the general population getting used to living with Covid, property prices coming off a low base from a cyclical perspective, as well as, a relatively weak rand. The currently weak ZAR is notable as it encourages foreign purchasers to start entering the market especially as international travel slowly starts to pick up. Thanks to Quay 1's significant international exposure, extending to over 180 countries around the world, we have experienced a significant increase in buyer activity from foreigners living across all corners of the globe this year.
Our market analysts at Quay 1 believe that there are several critical events to look out for in 2022 that may have an impact on the market:
1. Interest rates. The SARB Governor, Lesetja Kganyago, indicated that further interest rate increases in each quarter of 2022, 2023, and 2024 can be expected as the central bank looks to curb inflation fears while supporting the economy. An aggressive series of interest rate hikes will likely put a damper on affordability in the market over time. With that said, our opinion is that in order for the interest rate to have a significant adverse impact on the demand for property, it would need to be 3-4% higher than the current prime rate of 7.75%.
2. Inflation. The annual inflation rate in South Africa accelerated to 5.5% in November last year, which is the highest since 2017. This naturally puts pressure on disposable income and subsequent affordability. Whilst our view is that inflation will be more transitory in nature over the long term, this is by no means guaranteed.
3. Covid lockdown measures. At the end of last year, the country was dealt an economic blow when nations around the world put an abrupt ban on travel to our shores. Whilst the Omicron variant never lead to restrictions beyond that of Level 1, if other new variants emerge that put strain on the health system we could see increased measures. This would put further pressure on the economy, which could in turn impact demand and affordability for property.
4.The budget speech. The growing deficit, international borrowings for Covid-19 efforts, struggling SOE's and corruption has put significant pressure on SA's finances. All eyes will be on Enoch Godongwana's budget speech which usually takes place towards the end of February. We believe that there's a high chance that taxes in some form will need to be raised to plug the country's debt putting downward pressure on affordability.
5. Political unrest. Last year, factions within the ruling party led to widespread looting across several parts of the country. The President described the violent actions as a deliberate attempt to cripple the economy. With the Zondo commission state capture report which implicates a number of high-level politicians now finalised, the National Prosecuting Authority (NPA) has put together a special task force to investigate and act on the findings. The country will need to be vigilant around further economic attacks which can naturally affect sentiment and affordability as the impact is felt across the economy.
6. Eskom. During Q4 of last year, the country experienced rolling blackouts due to breakdowns at Eskom's power stations which had a significant impact on trade and employment. If breakdowns at the power utility continue into 2022 it will deal a significant blow to a post-Covid recovery. Eskom recently put forward an application to increase electricity prices further for Capetonians by 20.5% in 2022. If the application is approved, it could put downward pressure on affordability, particularly under the ZAR 3,000,000 mark.
From a real estate industry perspective, the economic challenges faced by many other sectors such as hospitality and tourism have encouraged a significant number of young people to start careers in real estate. This has brought about a fresh wave of energy and innovative ideas within the industry. Quay 1 has led this charge by welcoming over 45 new members to our high-performance team last year which has allowed the business to increase its footprint and market share across key areas across the country. We believe that our infrastructure, training and support is unparalleled within the industry making Quay 1 a popular choice for young professionals looking to thrive in the industry.
Meet some of our young women in Real Estate: click here to see the full interview.
Our experienced analysts, data experts and marketing strategists at Quay 1 will ensure that we keep you updated with the latest market trends and indicators. As a company we consistently invest in R&D so that we continue "Navigating Success" for our clients by maximising the returns on their assets in all market conditions.
We wish you a happy, healthy and prosperous year ahead and we look forward to serving your property needs in 2022!
Are you interested to know what your property is worth in this time of increased buyer activity? Please click the button below for a complimentary consultation with one of our area specialist brokers, or alternatively, to generate a data rich digital valuation.
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Author: Quay 1 International Realty
