South African property buyers are looking for more reasonably priced homes farther out from major cities, says Renier Kriek, the CEO of home financing company Sentinel Homes.

Kriek said that rising interest rates and the resulting decline in transaction volumes are some significant contributors to this trend.

Since the start of the rate cycle in November 2021, the SARB has hiked rates ten consecutive times – adding 475 basis points to the repo rate – making it more expensive to pay off a monthly bond and affecting opportunities to borrow money.

The CEO added that there are a ton of motivated sellers that are facing a rising cost squeeze, with price growth expected to stabilise until the rate cycle eases.

“Office vacancy rates have increased, resulting in consumers no longer being as motivated by office proximity when selecting homes. This means they can search for value in outlying areas.”

“Many even semigrate to other parts of the country. We also expect to see a rising level of commercial to residential conversions in urban areas,” Kriek said.

Real estate investment hotspots are currently coastal regions from the West Coast to Cape Town and Mossel Bay, said the property expert.

He added that the West Coast (north of Cape Town) is also seeing a rise in the real estate market, thanks to its charming tiny fishing villages and rural communities like Langebaan, St Helena Bay and Paternoster.

“Consumers who work from home are discovering the real value in pricing that was previously only influenced by variables connected to the regional fishing and farming industry.”

Kriek said that those that are still buying properties in the economic hub of Gauteng are no longer looking into freehold properties.

People are seeking out Gauteng estates and sectional schemes with guarded neighbourhoods and more reliable services.

Investing in a secure estate or a secured sectional title scheme is the most promising long-term option for individuals entering the Gauteng property market, said Kriek.

First-time buyer headache

Kriek says that first-time buyers – who make up a very large proportion of purchasers – are moving into the property market much later.

The lack of affordable housing supply and inefficient housing finance market in the affordable or gap housing market, specifically properties priced under R750,000, contributes significantly to this trend, said the CEO.

“The National government, through the Department of Human Settlements, unveiled significant updates to their Finance Linked Individual Subsidy Programme (FLISP), now called First Home Finance, with the aim to improve access to affordable and gap housing. The expanded policy is still in the nascent stage of implementation, however, and its effects are likely not to be evident in market trends until next year.”