SA Property - The Impact of 2020
Buy or rent? Sectional title or freestanding? Sell or auction?
Unforeseen events in 2020 saw buyers and sellers reconsidering their property needs, with surprising results
South Africa’s property industry lived a nightmare as 2020 unfolded to reveal a pandemic, an economy suddenly on life support, and subsequent plummeting house prices.
Negotiating the devastating consequences of various lockdown stages, the industry was quick to suggest solutions to government, but it took months before operations started up again and estate agents were allowed to show properties to prospective buyers.
Lockdown was a volatile time: property statistics painted a different picture every quarter, developers with advanced digital platforms sold homes online that buyers never set foot in, and industry practitioners had to adjust to unexpected new buyer expectations. But, what are 2020’s key trends and how are they shaping the property market going forward?
Space to live and work
The global Work-From-Home Experience Survey of 3,000 employees saw 73% of South African respondents report they’re working from home successfully (68% globally). Another recent Gallup poll indicated that nearly 60% of US workers want to continue working remotely, with most never wanting to return to the office. Back in April 2020, statistics by the UK’s Office for National Statistics showed that 49.2% of employees were working from home because of Covid-19. But, as early as March of the same year, Lloyds research reported that working from home is so popular in the UK that it had become a key consideration for those looking to buy or sell property.
Estate agencies in London also reported “a rush for properties since the real estate market opened back up, particularly for more spacious homes with outdoor space”. South Africa is likely to follow this trend, says Clifford Oosthuizen, managing director, of Westbrook, a 182ha secure lifestyle estate in Port Elizabeth. “The rise in remote working has led to more buyers seeking homes with an extra bedroom to turn into a home office,” he says. Betterbond CEO Carl Coetzee agrees, saying affordability has improved by 30%, following five consecutive repo rate cuts since January this year, seeing the average purchase price for almost all homebuyers up by 4% year on year in October. “This trend supports the renewed popularity of larger homes near safe, outdoor recreational amenities, and well-maintained open public spaces within secure, residential estates,” says Oosthuizen.
Bigger is better
One of the reasons for the post-lockdown resilience is the demand from young and first-time buyers – with the latter, according to ooba, currently comprising 52.4% of home purchases for the year to September. While this would usually signal demand for sectional title homes, an interesting trend appears to be emerging, says Andrew Golding, chief executive of the Pam Golding Property group.
“It’s becoming evident that freehold house price inflation has stabilised and is beginning to strengthen marginally, while price growth for sectional title homes continues to slow. For the year to date (January to October 2020), freehold house price inflation has averaged 2.6%, while sectional title inflation has averaged just 1.8%. “This suggests that demand now is stronger for freehold homes than sectional title homes – in a reversal of a long-term shift towards sectional title homes. However, this demand is probably felt less in the more expensive suburbs and more in affordable areas on the periphery of metros.”
Golding also says that some developers are converting one-bedroom apartments to two-bedroom units. For instance, at the Mzuri residential development in Somerset West, developers have reworked the 132 one- and two-bedroom apartment offering to 84 two-bedroom houses that are pet-friendly and have small enclosed gardens, priced from R1,595m.
Steve Brookes, chief executive of Balwin Properties, South Africa’s largest sectional title developer, says remote working has seen a dramatic change in the work environment and how homebuyers evaluate prospective properties. “Where it used to be the kitchen and bathroom that influenced the final purchase decision, these days fibre connectivity, leisure amenities and a greener footprint are top of the list,” he says. According to Brookes, the legacy of lockdown will drive demand for integrated communities for years to come. People will also be more considerate in terms of spending, saving on transport, car insurance and – importantly – have more time on their hands not being stuck in traffic.
He says this integrated community concept will spill over into the upmarket central business districts of Cape Town, Sandton, Waterfall, Rosebank and Fourways, as office space is converted into apartments and new, affordable high-rises are developed. “By ‘developing up’, shopping centre landlords are aiming to secure their target market through adding rooftop apartments and possible healthcare or educational facilities to their malls,” he says. Collaboration in the private sector and with government, especially to address the GAP market – those who earn too much to get a free house from the government and earn too little to get a bank bond – will further stimulate demand.
Small is also big
Jacques van Embden, MD of urban property development firm Blok, says instead of relying on guesswork, they conducted a survey to find out where and how people want to live before starting their Sea Point project SIX ON N. A total of 1,470 people took part – 55% from the Western Cape, 29% from Gauteng and 12% from KwaZulu-Natal – constituting a largely millennial audience. “Gen Y-ers make up 27% of the South African population, translating into a buying power of around 14 million people,” says Van Embden.
Of those surveyed, only 20% owned the property where they lived; 26% rented with friends or a partner; while the largest group (35%) still lived at home with their parents or caregiver. This is of particular interest, says van Embden, when you consider that the vast majority of respondents who lived at home were between the ages of 26 and 36, while 13% were over the age of 40.
“This may be a result of the economic landscape,” he says. “And financial pressure faced by today’s consumer who simply cannot afford to live independently.” The survey revealed the size of the property to be of least importance, with location cited as the most critical and price the second most important consideration.
Motivated by the Covid-19 lockdown, buying property via online auction has become increasingly mainstream, says BidX1 South Africa CEO MC du Toit. “As the mature players in this space, we’re seeing a huge increase in demand for a more modern, flexible approach to property sales. Buyers are now comfortable bidding online in a secure and transparent environment, and they prefer the privacy afforded by digital sales.
“Coupled with this, you cannot beat the convenience factor: you can bid on any device, from anywhere in the world, and complete the full transaction online.” According to du Toit, it’s of great value to sellers if the property firm they choose has technology and data at the heart of its model. “Activity on BidX1’s platform is increasing exponentially, with bids to the value of some R100m during October alone. “South African properties are also attracting attention from international buyers on our global database, such as the UK, US, Canada and Cyprus,” he says.
Courtesy: The EAAB - Estate Agency Affairs Board