Property Sales Surge Post National Lockdown
Category The Ballito Magazine
Property Surges! This headline you may have seen, and I expect you will see more of. For those of us at the coalface of the property industry our daily interactions with buyers and sellers, tenants and landlords, provides direct insight into the market and we tend to "feel" the changes before the historical data supporting our assessments. Most estate agents will be able to advise you when we are in a recession long before the official GDP statistics reveal this. Delighted to be operational from 1 June 2020 following the national lock-down, the incredible surge in demand for residential property was a pleasant and unexpected surprise. As the data starts the filter through supporting this market demand strength we see from the FNB House Price Index a rebound in July to 1,4% year-on-year growth from 0,7% in June and 0,6% in May. Most property practitioners and market commentators were expecting a retreat in demand and an over-supply of properties exercising downward pricing pressure. Prices have indeed retreated in some price categories, but we have witnessed a surge in demand last seen during the boom experienced in 2015. If the current activity levels continue, the current year will exceed 2019 in sales. How is this increase in demand for property to be explained? There is no doubt that there was some pent-up demand post-lockdown that had to be satisfied and that many people had time to contemplate their requirements during the extended lock-down period, and immediately acted decisively to secure a property. As a financial person, my view is that the dramatic drop in interest rates has had a considerable impact on decision making. Tenants have started to compare rentals to the cost of ownership and where the repayment on a mortgage bond starts to move closer to the average rental rate, it becomes a compelling reason to buy a similar property. The availability of finance at the cheapest rates in five decades is the fuel to the demand for real estate. The one thing that can upset this activity is the weakness in the labour market. You have to be employed with a predictable stream of income to qualify for mortgage finance. If unemployment increases as some expect over the next six months, we may see a dampening impact on demand throughout the economy. Apart from the cost of money, an additional reason cited to explain the surge in demand relates to behavioural shifts and the reassessment of general housing needs. People moving away from smaller city apartments to larger homes in the suburbs given the ability to work remotely more effectively than previously anticipated is a global trend we can expect to see in South Africa as well. For Zimbali, and surrounds, we see an increase in people moving down from Gauteng for lifestyle reasons, having now realized much work can be done effectively from almost anywhere with good internet connectivity. The debate by economists is if we will see a V-shaped recovery - a quick up after the down, or a W-shaped type of scenario, with a second downturn after the current recovery. Time will tell, but for now, estate agents are happy to be busy.
Author: Andreas Wassenaar
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