How will interest-rate hikes affect property prices in Cape Town?
South Africa has always experienced extreme market conditions over the years, primarily due to political, economic and demographic factors. Recent interest-rate hikes coupled with high levels of inflation have put households under pressure; however, home-buyer activity within the Cape Town area has remained rather resilient despite the increase in economic pressure.
FNB recently conducted a survey to establish homeowners' reasons for selling. Surprisingly, the data showed that, although the economic landscape is challenging in many respects, only 8% of sellers noted that they were disposing of their assets due to financial pressure. Furthermore, the majority of homeowners working from home indicated that they were selling as a means to upgrade.
The luxury segment of the market (R10 million+) has been known to operate in its own economy and homeowners in this segment are less price sensitive to spikes in interest rates; and the same applies to purchasers, who are often from abroad.
Despite the challenging economic times brought about by Covid-19 pandemic, Lightstone data revealed that in 2021 more than 984 homes were sold, valued at more than ZAR 10 million, were sold in South Africa. This number is among the highest in recent years.
Cape Town has fast become the area of choice within the Western Cape among semigrants, investors and owner-occupier's. This has certainly added to the resilience in price points during a time when property' prices are declining in many other provinces in South Africa.
Although this may be positive news, Quay 1 would advise those toying with the idea of selling in the near-to-medium term to take advantage of the current window of opportunity while the market conditions are favourable. Factors such as additional interest-rate hikes, increasing unemployment levels as well as the increase in load-shedding activity without solutions in sight, are all factors that economists predict will put a serious damper on all sectors of the economy in the next five to 10 years.
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