It is impossible to time the property market with total accuracy but, for those who know what to look out for, there are a few key indicators that can point to a potential change in market conditions.
“There isn’t an exact science on how the property market is going to behave. That’s why so many, myself included, dislike having to make any precise predictions because the property market can, and so often does, surprise us,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
That being said, Goslett also shares that there are several indicators that will have an impact on how the property market will perform. It is based on these indicators that experts are able to make their predictions.
Changing Interest Rates
The first indicator is linked to macroeconomic factors. In general, rising inflation will mean that interest rates will climb which then leads to less consumer spending as debts become more expensive. This leads to fewer qualified buyers and a less active property market. That is why many real estate experts are predicting that the property market will be less active this year following the series of interest rate hikes that have been implemented since November 2021.
Number of available listings
Another indicator of a changing market is how much stock is available. During tough economic times, consumers tend to avoid making large financial decisions. It becomes tricky for real estate agents to secure new listings and to find new qualified buyers and tenants. This is usually a precursor to either having too many homes enter the market (which happens during tough economic circumstances) or having more qualified buyers than there are homes available (which happens during prosperous economic seasons). “When economic circumstances change, there can also be a shift away from buying a home and an increase towards renting a home instead, which is what we are currently noticing,” says Goslett.
Number of days on market
Another good indicator that market conditions are changing is to keep an eye on how long properties are remaining on the market before they are marked as sold or rented. When in a seller’s market, homes will not be on the market for long before an interested buyer comes along. However, when more and more homes start to sit on listing portals for longer than three months, this usually indicates a shift in market activity.
Average house prices
One of the most obvious factors to keep an eye on is the average house prices in the area. Keeping an eye on how much homes in your immediate surroundings are selling for can provide an indication of how well that particular market is performing. On the whole, South Africa’s annual house price appreciation has been slow for the last few years. In their January newsletter, Lightstone suggested that House Price Inflation in SA would likely come in between 0.9% (low) to 2.3% (mid) or 3.7% (high), all of which would be below inflation.
These are just a few of the key factors to keep an eye on if you are interested to know how the property market is performing. However, Goslett notes that these factors can play out both at a macro and micro level. “Some suburbs might follow their own trends that might not reflect what is happening in the province or even the country as a whole. That is why it is useful to build a good working relationship with a suburb expert who can keep you informed about how your suburb is performing,” he notes.
Even if market conditions are tough, Goslett says that the need for housing will always exist, “which makes real estate one of the safest investment options for those who make smart purchases,” he concludes.
