Interest rate hikes hurt house sales

Published Nov 17, 2023


Estate agents in the greater Durban area have noted a decline in house sales in 2023 compared with last year.

They have attributed the decline to the high interest rate and people simply not having enough money to afford houses. The FNB House Price Index for September indicated that growth slowed to 0.8% year-on-year in August with the market strength index showing “declining levels of demand”.

Grant Gavin, owner of RE/MAX Panache in Durban North, said they had noted a drop in their year-on-year sales of houses.

“Our sales volumes are down 21% year on year. This is largely due to the decrease in demand from buyers as the increase in interest rates has impacted their affordability.”

Gavin added that they had also noted that people were looking to move to smaller accommodation for security reasons.

“The trend towards smaller, more manageable accommodation has been continuing for some time now, along with the move to estates and secure complexes, where accommodation is more lock-up-and-go, offering lifestyle and security benefits.”

Fatima Seedat, an estate agent with Pam Golding Properties on Florida Road, said 2023 has been a quiet year compared to 2022.

“We have seen a drop in the sale of houses in 2023. However, it is something that can be expected as interest rates have been going up and up. We are also finding that people are facing high unemployment and tough economic times and simply can’t afford to buy houses.”

Seedat added that on the other hand rentals have been booming.

“This is really where agents have been earning their pay. People can’t afford to buy houses, so they are choosing to rent. The other thing we have noticed is that sellers are dropping the price of houses, but that hasn’t helped with sales.”

Shakilla Sukhan from Shanel Real Estates said selling houses has not been good this year. “We however have to be realistic. The tough economic times have made it difficult to sell houses as people can’t afford it. We have also noticed this year that there are a lot of people relocating overseas and have put beautiful houses for sale in affluent areas. Unfortunately, these houses are not being purchased. It’s definitely a tough time for us. Last year the interest rate was not affecting us as much and sales for houses were not as bad.”

Thabsile Mthembu, an estate agent from Africa Kesse Real Estate, said she is concerned that sales were similar to what was experienced during the Covid-19 pandemic.

“During Covid-19 things were very bad; we had little to no sales. However, when the lockdown ended and the restrictions came to an end we expected things to be a lot better. It did improve for a while, but with interest rates going up, especially this year, things are really bad for estate agents. The problem is people are struggling to buy houses and we need people to buy so that we can make a living.”

Laven Pillay, CEO and founder of Jazmax Estate Agents, said that he was especially concerned about the interest rates.

“The interest rate has caused house sales to drop, but I’m concerned the economy was virtually dead during Covid-19, yet the interest rate was not hiked. Now we are finding that the economy is active and the interest rate is being hiked. This is discouraging people from buying houses.”

Pillay called for support from the government and banks.

“Our industry is getting worse. We need the government to support people that want to buy houses and not make it difficult. Banks also need to come to the party as they have economists who predicted the interest rate would increase.

They should have put plans in place so that people can still take mortgages and be able to afford the repayments.”

The FNB House Price Index report had made similar findings in September stating that an internally developed market strength index, derived from its property valuers’ database, continued to show declining levels of demand, while the supply of properties for sale was relatively stable in August.

“Feedback from our latest Estate Agents survey suggests that two-thirds (67%) of listed properties now take three months or more to sell, up from 56% in 2Q23. Nevertheless, 50% of interviewed agents expect activity to pick up in the next three months, especially in the affordable market, largely due to seasonal factors.”

The Mercury