The long-standing relationship between interest rates and selling times in South Africa’s housing market appears to have broken down-at least for now.
Even the aggressive post-pandemic hiking cycle failed to push the average time it took to sell a home above the long-term average of 13 weeks, says Sandra Gordon, an Independent Research Economist.
She says despite the still high interest rates, the national time on market actually fell by one week to 10 weeks and six days in the second quarter of this year, according to the latest FNB Estate Agent Survey.
“That’s a sharp contrast to previous cycles, when elevated rates typically resulted in far lengthier selling times.”
Structural forces now shaping the market more powerfully than monetary policy
The research economist says the one possible explanation is that a number of structural forces are now shaping the market more powerfully than monetary policy:
•Semigration is sustaining strong demand in regions with better services and quality of life, drawing in motivated, often well-resourced buyers.
•Quality stock in high-demand suburbs remains scarce, leading to quick sales when properties do come to market.
•A growing share of buyers are more affluent, requiring much smaller loans or buying for cash – making them far less sensitive to interest-rate movements.
Buyer activity appears to be far less dependent on the cost of credit
In short, Gordon says the buyer activity appears to be far less dependent on the cost of credit than has typically been the case during the past 15 to 20 years.
She says if the US-Iran deal holds and the Strait of Hormuz re-opens, the improved local inflation outlook should ultimately allow the SARB to resume its easing cycle.
“While lower rates would help revive first-time buyer demand, the increased influence of these interest rate sensitive buyers would likely remain just one factor among many, rather than the dominant market driver they were for much of the past two decades.”
Meanwhile, buyer silence is not always a sign of lost interest. In many cases, it points to growing caution, tighter budgets and the pressure of making the right property choice, says REMAX Southern Africa.
It says there is nothing more frustrating for sellers than a buyer who seems genuinely interested during a viewing, asking all the right questions and picturing themselves living in the home, only to go silent afterwards.
Buyers navigate affordability pressures, economic uncertainty and a wealth of information at their fingertips
According to Adrian Goslett, CEO and Regional Director of REMAX Southern Africa, while this can feel personal, this behaviour is becoming a familiar part of today’s property market as buyers navigate affordability pressures, economic uncertainty and a wealth of information at their fingertips.
Today’s buyers are taking longer to make major financial decisions
“While sellers may see silence as disinterest, the reality is a bit more complicated than that. Today’s buyers are taking longer to make major financial decisions, as they do their own research and try to carefully weigh out their options before making a commitment.”
“In many cases, buyers don’t just simply disappear because they don’t like a property, they disappear because they’re uncertain and don’t want to make a decision prematurely, especially as affordability remains a key constraint within the residential property market” said Goslett.
A property that initially seemed affordable online may feel less attainable
Usually after a viewing, buyers will revisit their financial calculations.
A property that initially seemed affordable online may feel less attainable once all associated costs, from transfer costs to municipal charges, are considered. Instead of entering negotiations unprepared, many buyers may opt to continue their search without further communication.
Goslett further noted that pricing can also play a significant role.
“With access to an abundance of listings online and market data, buyers can compare properties more easily than ever before. If a home seems overpriced compared to other properties in the area, prospective buyers may move on instead of attempting to negotiate,” explains Goslett.
Goslett also highlights that not every viewing represents a transaction-ready buyer either.
Some prospective purchasers attend viewings to familiarise themselves with neighbourhoods, compare property types or better understand market conditions before actively entering the market.
While these viewings may generate interest, they do not always translate into offers.
“Competitive pricing, strong presentation and effective marketing remain essential to a successful sale. Sellers should address maintenance issues, provide clear property information and work with experienced real estate professionals to build buyer confidence and improve their chances of securing a sale,” concluded Goslett.
Independent Media Property
