The coronavirus has triggered fundamental shifts in South Africa’s housing market

The level of activity in the housing market in the months since real estate agencies were allowed to reopen on 1 June has surprised market analysts, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

He cited recent FNB data which shows that not only has the volume of new mortgage applications rebounded beyond pre-lockdown levels across the price spectrum, the level of buyer interest seen on property portals has also surpassed levels seen in early-2020.

“The resilience of the local market certainly runs counter to initial expectations that residential market activity, already subdued by years of sluggish economic growth, would slump further,” Golding said.

“However, it would seem that there are a number of factors currently driving significant sales volumes in South Africa’s residential property market.

The fact that Deeds Offices were closed for several months has created a considerable pent-up demand, along with historically low-interest rates, are but two of these factors.

Back to normal? 

One of the obvious, but significant changes caused as a result of the pandemic has been the Reserve Bank’s decision to slash interest rates by 300bps to an almost 50-year low of 7%, said Golding.

For many homeowners, this unprecedented low, coupled with the price correction in the local residential market in recent years to more realistic levels, has resulted in a clear message that this may well represent a ‘once in a lifetime’ opportunity for buyers.

“For numerous purchasers, especially first-time buyers, this is new and appealing territory, and they are taking this message to heart – with bond originator ooba noting the surge in first-time and 100% bond applications in recent months.

“According to ooba, home loan applications rebounded in June and by July volumes were over 60% above year-earlier levels. In June, 68% of ooba’s home loan applications were for 100% bonds, with an approval rate of over 80%.”

First-time home buyers are also taking advantage of the cheaper finance to acquire more expensive properties, with such buyers accounting for almost 53% of home loans during the second quarter, according to Ooba.

To temper any expectations of an unrealistically buoyant property market, however, it is important to note that there has not been any significant increase in new stock volumes coming onto the market, when compared to ‘normal volumes’, said Golding.

“What we have seen is that the residential property market has come out of the gates very strongly after the restart of real estate activities at the beginning of June and during July 2020, with most of this activity driven by realistic pricing expectations and motivated sellers.”

Notably in the Western Cape and other sought-after locations in South Africa, well-priced properties are now attracting strong buyer interest, said Golding.

“Against a backdrop of the current buyer’s market, coupled with a prime interest rate at a historic low and expected to remain at low levels for the foreseeable future, savvy home buyers seeking access to finance have never been better placed to make sound investment property acquisitions across all price ranges and property types, but perhaps particularly in the price band up to around R3 million. People, including investors, have realised that now is the time to buy.”

He said that the main price bands experiencing the most interest and activity are those up to R2.5 million and R3 million, followed by the middle market price band between R3 million and R8 million, and upwards.

Long-term changes

The Pam Golding group said that during the months of June and July it experienced a significant activity uptick in terms of successfully concluded sales.

“While partly attributable to the pent-up demand as a result of the lockdown, is also indicative of a tendency among some buyers  to reassess their residential ‘lifestyle’ requirements as a result of the lockdown, as well as an aforementioned strong appetite among first-time buyers to enter the property market,” said Golding.

“The latter is partly driven by former renters who prefer to put down roots and gain security of tenure by purchasing their own homes – rather than pay rental, while capitalising on the low interest rates as well as the zero transfer duty payable on properties selling below R1 million.”

He added that many millennials who used to remain mobile, maintaining flexibility to travel globally, seem to be looking at getting apartments and ‘settling down’ for now.

“While the final trajectory of Covid-19 is far from clear, one can imagine that it has sparked a significant shift in circumstances, priorities and lifestyles triggered by weeks and even months spent more or less confined to home, which has prompted homeowners to make either new or long-planned changes to their living conditions.

“These decisions may in part be prompted by the marked deterioration in economic prospects resulting from the prolonged restrictions in business activity due to the lockdown. ”

Various trends evident in the marketplace include relocation to smaller and/or coastal towns, and downsizing due to financial pressures or upsizing – to satisfy the need for work-from-home space and more outdoor space, Golding said.

In this regard, the property group said it is seeing a shift back to freestanding homes with garden cottages and an increasing demand for homes in secure lifestyle estates.

Golding said that there is even talk that the number of separations/divorces has increased after lockdown, which would create activity in the residential property market.

“Furthermore, depending on how the pandemic and lockdown impacts, some families are choosing to live together to save costs, namely multigenerational living, others are relocating provincially – perhaps to a more relaxed lifestyle in a second-tier city, while some are emigrating.

“That said, we are not seeing a specific increase in sellers due to emigration – we have also noted that some sellers who were preparing to emigrate either cannot get to their destinations or in some cases the jobs they were going to, have been done away with.”


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The coronavirus has triggered fundamental shifts in South Africa’s housing market