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The South African Property Market in 2023: Opportunities and Challenges

Updated: Feb 7, 2023

As 2023 begins, many ordinary South Africans may have concerns about the state of the property market and how it will impact their financial decisions. These concerns may include issues such as the shuttering economy, load-shedding, high interest rates, and challenges with bond applications. In this article, we will explore these challenges and how they may impact the South African property market in 2023.



We will also provide an overview of the opportunities that may be available for investors, and offer tips for how ordinary South Africans can navigate these challenges and make informed decisions about their financial futures. By understanding the current state of the market and staying up-to-date on the latest trends and developments, ordinary South Africans can make informed decisions about their investments and financial goals.


Overview of the economy


Given the challenges facing the South African economy, such as sky-high unemployment, rising inflation, and load-shedding, along with the potential for more rate hikes, it is no surprise that these key factors are directly affecting the property market and slowing it down. As the cost of living rises due to inflation, many people may find it difficult to afford South African real estate investments, as they may no longer have the buying power to make these purchases.


The South African property market is a complex and dynamic one, with a range of factors that can impact its performance. As we set about the year, it is important to consider how various economic and market conditions could affect the market in the new year. The possibility of a recession in 2023 has also raised concerns about how it might affect the property market. Here is a brief overview of some of the opportunities and challenges and their potential impacts:

Opportunities:




  1. Lower prices: A slower housing market can create great investment opportunities for savvy investors, as it may provide the opportunity to secure lower prices. When demand for housing is lower, sellers may be more willing to negotiate on price, providing investors with the chance to secure a good deal.

  2. Impact of inflation on rental demand: As people may already be hesitant to make big financial commitments such as purchasing a home because less disposable income available to spend on non-essential items. An increase in the number of people looking to rent due to reduced affordability or other factors, could lead to higher rental demand and income. On the other hand, if there is an excess of supply relative to demand, this could lead to lower rental income.

  3. Potential for price appreciation: As the market recovers, the value of well-chosen properties may increase, providing investors with the opportunity to realise strong returns on their investments and cash flow.

  4. Impact of high interest on supply: As demand decreases, there may be an increase in the supply of properties on the market, as people who are unable to sell their homes due to the lack of buyers or due to financial constraints may be forced to lower their asking prices in order to make a sale. This could lead to more options for buyers, but also potentially lower prices due to increased competition.


Challenges:




  1. Shuttering economy: The South African economy has been struggling in recent years, with slow growth and high unemployment. According to data from Statistics South Africa, the unemployment rate in South Africa was at 32.9% in the third quarter of 2022. A weak economy can have a negative impact on the property market, as it can lead to decreased demand for housing and potentially lower prices.

  2. Impact of load-shedding on demand for properties: load-shedding can make it more difficult for potential buyers to view properties, cause delays and disruptions in the process of buying and selling properties, which can make it more difficult for real estate professionals to do their jobs and can slow down the market overall. This can create uncertainty and frustration, which can deter buyers and sellers from participating in the market.

  3. Tightening of credit: Although, according to data from ooba, the average approval rate on applications processed during Q3 ‘22 was 83.3% - up from Q3 21’s 82,9%. In 2023, lenders may become more cautious about issuing mortgages and other forms of credit. This could make it more difficult for people to obtain financing to buy a property investment in South Africa or make a shift in the types of properties that are in demand.

  4. Reduced affordability: Higher interest rates can also make it more difficult for buyers to afford the monthly mortgage payments on a home, which can further decrease demand. This can be especially challenging for first-time buyers or those with lower incomes.

Despite the challenges and uncertainties facing the South African property market, there are still a number of opportunities for investors. In fact, the slowing down of the housing market can create great investment opportunities for savvy investors who keep informed about market trends and conditions. FNB property barometer states that internal mortgage applications, while softening, are still significantly ahead of the pre-pandemic 2019 levels and this goes to show that the banks' home loans appetite remains soaring regardless of the market conditions. This is great news for savvy investors who are exploring South African real estate investments that offer the potential for strong returns and price appreciation, particularly in areas with high demand for housing. Additionally, the market is becoming more diverse, with a wider range of options for investors, such as luxury homes, affordable housing, and commercial properties.


Now is a good time for investors to consider South African real estate investment opportunities, as the market is showing signs of growth and improvement. It is important for investors to carefully consider their options and conduct thorough research before making any decisions, taking into account factors such as location, economic conditions, and demographic trends. With careful planning and a long-term perspective, South African real estate investments can be a rewarding and lucrative choice for investors.

If you have further questions or concerns about the South African property market in 2023, or if you would like to explore your investment options, we encourage you to get in touch with one of our experts. Our team of experienced professionals is here to help you navigate the complexities of the property market and make informed decisions about your financial future. We partner with ordinary South Africans, helping them understand South African property investments in order to achieve capital growth, passive income, and safety. Contact us today to learn more and get started on your investment journey.



Disclaimer : None of the information contained here constitutes an offer (or solicitation of an offer) to make any investment, or to participate in any particular investment strategy. investRand does not take into account of your personal investment objectives, specific investment goals, specific needs or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here.

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