Here's who is actually buying homes in South Africa

Although domestic and global headwinds are persisting into 2023, South Africa's residential property is showing pockets of progress and opportunity, says Hayley Ivins-Downes, the head of digital at Lightstone.

Ivines-Downes said that the data analytics company found rising interest rates, socio-political tensions, and a limp economy hampered by an unstable electricity supply dampened consumers' spirit.

Despite the slight dampening, the most recent comprehensive data from Lightstone points to certain categories of buyers carrying the market with Mid value and High-value segments carrying the market at 37% and 32%, respectively, in 2021 - a consistent trend for many years.

Ivins-Downes said that: "Luxury category buyers were back to 12% in 2021, the highest recorded in this category and last matched in 2015, and buyers in the High category hit 32% in 2021, the highest score recorded in the past 14 years."

Low-value buyers, unfortunately, dropped below 20% in 2021, said Ivins-Downes.

This perhaps suggests fewer new entrants into the market - an unwelcome development given the country's demographics - with market activity dominated by the Mid and High values, said the head of digital.

The number of transfers remained uneven, with 2022 anticipated to reach around 330,000, well down from the high of 493,000 recorded just prior to the 2008 crash, she noted.

"However, if sales in 2022 hit 330 000, it would match the 2021 Covid-19 bounce-back from 263,000 and similar volumes last recorded in 2017 and 2018."

According to Lightstone, mid-value and high-value homes saw the most pronounced property price inflation when compared to alternative homes - this was except for a dip in 2013 and 2014.

Low-value property price inflation in 2021 was 12%, more than double High-value (5.1%), Luxury (5.2%) and Mid value (5.4%), and more than double the national average of 5.3%, reported Lightstone.

Low-value property price inflation has been over 9% since 2016.

Lightstone said that the Luxury category saw the most significant price drop, coming off a high in 2014 at 7.7%, and dropping to 5.2% in 2021.

"High-value properties also peaked in 2014 at 6,3%, and in 2021 were 5,1%, while Mid value prices had their best year in 2020 (6,0%), dropping to 5,4% in 2021."

To increase affordability for home ownership, banks are offering higher loan-to-value (LTV).

"We can also see property owners holding onto their properties for longer...this was especially true of the High-value segment," Ivins-Downes said.

Rates

The South African Reserve Bank (SARB) raised interest rates up another 75 basis points on 25 November - pushing the prime rate to 10.50% and making it harder to pay of monthly bonds on a home.

"High inflation and weak economic growth continue to shape global conditions alongside monetary and fiscal policy responses. Russia's war in Ukraine drags on, impairing trade and raising prices of a wide range of energy, food and other commodities," said the SARB governor Lesetja Kganyago.

A 20-year bond on an R1,000,000 house will now set back the average South African R9,980 a month while an R3,000,000 property R29,950.

High-value and luxury properties above R5,000,000 can easily see monthly repayments on bonds surpassing R50,000 a month.