Sentiment towards buying property recorded a high of 82% in the first quarter of 2021, according to a report.
This was according to the Absa Homeowner Sentiment Index (HSI) which shows that this is the highest level since the introduction of the HSI in Q1 2016, when the sentiment was 60%.
Investing in property recorded a high of 83% during the first quarter of 2021, from 78% in Q4 2020.
Gauteng recorded the highest percentage of 87% positive sentiment towards buying, 85% for investing in property, and 83% for buying rather renting. The overall sentiment for the province was 80% in the first quarter of 2021.
“Sentiment towards buying property grew faster than sentiment towards selling property for the second consecutive quarter,” says Muzi Zim, Manager of Advanced Analytics at Absa Home Loans.
Zim says that the rally due to the low interest rate cycle on sentiment towards buying property, has given way to property accumulating in value. “This could be indicative of the anticipated price increases due to the widening gap between willing buyers and willing sellers.”
The HSI indicates that confidence in the South African property market rose to 81% in Q1 2021, from 80% in Q4 2020. Of these consumers, 58% felt that property is and always has been a secure asset, with another 58% saying that property creates long-term income.
However, an unstable economy, land expropriation without compensation making property an uncertain investment, and consumers being under financial strain were cited as negative factors.
Zim explains that buying sentiment, together with observed demand, have been sustained since the latter part of Q2 2020. This demand has continued to be met with a mismatch in the supply of stock.
“Initially, this was due to potential sellers perceiving house prices to be too low to sell. However, this has likely shifted to property owners wanting to ride the price increase wave to achieve better selling prices closer to the top of the cycle.”
Mortgage lending good for buying
Absa notes that overall, mortgage lending has increased since the fourth quarter of 2020. “The increase would have been supported by the rise in demand for property, the shift towards more property being financed (rather than cash purchases) and higher loan-to-value deals being concluded,” says Zim.
The oobarometer Q1 2021 reveals a robust growth in the residential property sector despite a year dominated by the Covid-19 pandemic.
Data shows that 61% of home loan applicants approved by ooba Home Loans required a zero-deposit loan. The approval rate across first-time buyers who required a zero-deposit loan was 79.3%.
Rhys Dyer, CEO of ooba, says that in Q1 2021, ooba successfully obtained home loan finance for 80.7% of its applicants.
“The unprecedented low cost of borrowing coupled with the major banks’ appetite to take on low- or no-deposit loans have created an ideal buying environment, particularly for first-time buyers,” says Dyer.
Buying rather than renting
Overall, sentiment towards buying rather than renting recorded 81% in the first quarter of 2021, according to Absa.
Zim says of those surveyed, 58% said it is better to own than rent, with 47% saying that property still accumulates in value, which makes it a good investment.
Others of those surveyed, however, felt that renting is more flexible with less commitment required, citing job security/risk of unemployment as the reasons they would rent rather than buy.
According to Absa, those who had never owned property had a reduction in sentiment towards buying rather than renting. This group cited the cost of property ownership, maintenance costs and transfer costs as reasons to continue renting.
For many people, such as Counterpoint value fund manager, Piet Viljoen, renting is cheaper than owning property. While he acknowledges that property gives owners a sense of security and belonging, he doesn’t think it makes sense to invest in property.
Viljoen told BizNews last week that the costs of homeownership are extremely high. For example, if one is not paying cash, they would need to apply for a home loan. There are additional costs such as levies, rates and taxes and general maintenance of the property especially as it gets older.
According to Absa, sentiment towards buying property grew faster than sentiment towards selling property for the second consecutive quarter. Currently, 35% of respondents consider it an appropriate time to sell property.
Of the respondents, 56% said there is a good chance of getting a good price, while 41% believe the market is doing well.
Meanwhile, a recent FNB report shows that house price growth slowed in May, following 11 months of successive gains.
Edited by Gudrun Kaiser