Nicolas Stecherthe Property Market: Moving With The Times
Finweek English|23 July 2021
The pandemic has moved the goal posts, changing the criteria for property.

Living preferences and working behaviours triggered by Covid-19 have upended the property landscape.

Our homes are no longer just living spaces, they have become working, social, and educating places. With the ability to work from home, suddenly things like commuting time or geographical location are not such critical issues anymore and people have been making different decisions about how, and where, they want to live.

Commercial property has borne the brunt of altered patterns. And while residential property has not escaped entirely unscathed, these changes have, to some degree, favoured the residential property market.

Now more than ever before, there is more focus on the home. And South African homebuyers have continued to capitalise on the favourable buying environment. The three percentage points interest rate cuts in 2020 and the decision in May to leave the repo rate unchanged at 3.5%, has culminated in an active residential market.

Safe as houses?

National house price inflation has bounced back; the Pam Golding Residential Property Index showed house price growth of 5.1% for June 2021. It is quite the rebound from the low of 2.4% in March 2019, and the first time it has breached 5% since 2016.

“There is definitely a sense that house price growth is on the move, and it is on the move at or near inflation, which previously was not the case. That indicates real house price growth as opposed to just nominal house price growth,” Dr Andrew Golding, chief executive of the Pam Golding Property group (PGP), tells finweek.

Meanwhile growth in house prices in the lower price band (below R1m) continued to accelerate by 7.47% in May 2021, says PGP.

The strengthening of the market is also reflected by the decline in the average time of homes on the market prior to sale. That shortened from 17 weeks and six days at mid-2018, to eight weeks and two days in the first quarter of 2021, says John Loos, property sector strategist at FNB Commercial Property Finance.

As size for remote working and home schooling took on more significance, freehold properties outperformed sectional title much of last year, reversing sectional title’s outperformance trend before the pandemic struck.

Seeff Property Group says that while the market for family houses below R1.8m has been booming since mid-2020, they have also seen a marked increase in sales of suburban houses in the R3m to R4m price band.

Still, sectional title numbers are in line with what they were before the pandemic, says Golding.

The demand for larger-sized homes may be short-lived as households are financially constrained, says Loos.

“We saw building activity show some growth in the ‘free standing’ over 80m2 category in recent times, probably due to big interest rate cuts and demand shifting ‘upward’ as a result of improved credit affordability. I think that will revert back to smaller-sized flats and townhouses that are financially more economical.”

Entry-level buyers and sectional title sales are on the move. Prior to last year’s interest rate cuts, home buying for entry-level buyers was cost-prohibitive. Now these buyers are at the heart of SA’s active residential market and sectional title units are attracting a growing number of first-time homebuyers.

Despite the impact of Covid-19 and lockdown, property sales in Bloemfontein in 2020 were the highest recorded over the past decade, 50% of those sales attributed to first-time homebuyers, reports PGP.

In May 2020, sectional title sales represented 25.3% of total sales. That rose to 27.7% by February 2021, says PGP.

According to Seeff Property Group, over the last 12 months almost 80% of all units sold on the Western Cape’s Atlantic Seaboard and about 67% in the city centre and City Bowl area were sectional title.

Then there is the revival in the luxury market. The hard-hit luxury market revived after the lockdown with sales to a combination of foreign buyers and South Africans. “High-net-worth individuals are purchasing properties they now feel they can live in permanently, which they couldn’t before,” says Golding.

“The top end of the coastal market has been better than the top end of the Joburg market, although even in Joburg for the first time in ages we are seeing properties changing hands above R20m.”

Samuel Seeff, chairman of the Seeff Property Group, tells finweek that the company has enjoyed a significant uptick in the R20m-plus sector of the market, boosted also by foreign buyers from the UK, Germany, US and so forth as well as SA expats looking to invest with a view to returning to the country.

The Covid-19 pandemic and the ability to work remotely have driven people to areas like coastal towns, which afford more space and a better quality lifestyle.

According to Seeff Property, out-of-towners now make up 70% of all sales in Hermanus. Traditionally a town for older buyers and retirees, almost a quarter of permanent residents are now under 35 years.

And semigration to coastal areas has picked up pace. “The semigration trend from inland to the coast, from the KwaZulu-Natal coast all the way down to the Cape coast, has been reignited,” Golding tells finweek.

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