Consumers with an overall positive sentiment about the property market in South Africa improved slightly (2%) in the third quarter of the year to 76% compared to the second quarter.
This is according to the latest Absa Homeowner Sentiment Index (HSI), which indicates consumer sentiment regarding the property market in the country. The index also measures sentiments about the current timing for buying, selling and investing in property.
"The market continues to garner positive sentiment towards buying property with the current property prices and interest rates being the prominent drivers for this sentiment. There have been five interest rate cuts in the past year, amounting to 3%.
In the third quarter 71% of respondents said they consider it an appropriate time to buy property. There has been a significant increase (6%) in the number of respondents who believe that property prices are low, with potential bargains in the market. Low interest rates are another positive factor for respondents.
"Respondents have also started to mention the realisation of property ownership benefits, which are seen as having improved with the increase in demand due to the low interest rate cycle. Securing a good price for property is playing a more significant role in driving the sentiment to sell property," according to the index report.
Negative factors influencing considerations to buy included the lacklustre economy and the impact of Covid-19. Only 4% of respondents who said they are not confident in the property market mentioned Covid-19 specifically - down 3% from the second quarter. The index seems to indicate that respondents' source of concern is rather shifting towards uncertainty in general.
At the same time, only 29% of respondents consider it an appropriate time to sell property, considering the current market where prices are regarded as low and the economic outlook remains negative. About 65% of respondents consider it an appropriate time to rather renovate or make alterations, considering the current market.
As for buying versus renting, 77% of respondents consider it an appropriate time to buy rather than rent, considering the current market.
"The increase in property prices as a driver of both the buying and selling sub-indices indicates that the market has not yet reached consensus about where property prices are currently. The additional effect of interest rate reductions could indicate a potential tendency by buyers to consider purchase price more on the basis of monthly instalment payments - where finance is used - than on the ticket price of the property," according to the index report.
"With the major interest rate adjustments behind us, and in the absence of further market aberrations, we expect the market to settle on a new property price structure fairly soon. A reduction in property price as a driver of either the buying or selling sub-index in the coming quarters could serve as a leading indicator for where market prices could land."