FINANCING
Residential property is still a business avenue
DR ANDREW GOLDING
According to a recent report by global property group Savills , Covid-19 and ensuing lockdowns have severely disrupted the global economy with few sectors unaffected , with leisure , hospitality and retail particularly hard hit by lockdowns and social distancing measures .
However , the residential real estate industry has so far proven
to be one of the more resilient sectors as has been the case to date in South Africa where the residential property market has seen an earlier than expected rebound with momentum continuing , underpinned by 50-year low interest rates . This is particularly evident in the price bands between R700 000 and R3 million , with additional encouraging signs of increasing activity at the top end of the market .
Positively , affordability has improved on the back of the significantly reduced interest rates , with serious sellers responding to the current economic environment with realistic , market-related pricing . While house prices have continued to show positive growth this year , on a real or inflation adjusted basis they remain in negative territory , reflecting an ongoing price correction in line with the persistently subdued national economic growth rate .
Not surprisingly , the significant reduction in the interest rate has made home ownership an appealing proposition for many tenants .
The year 2020 in review As expected , given South Africa ’ s hard lockdown and Covid-19 restrictions , Lightstone data ( June 2020 ) shows a sharp drop off in unit sales in South Africa in 2020 . After averaging around 22 000 units per month each year between 2013 and 2015 , this slowed to 21 148 ( 2016 ) and 20 644 ( 2017 ) as well as 19 003 ( 2018 ) and 17 328 ( 2019 ). This , as the sluggish economy took its toll on the market . During the first half of 2020 , just 5 178 units were sold ( although repeated closures of Deeds Offices across the country resulted in a longer delay than usual in transfer of properties sold during this period ). Nonetheless , activity , particularly since June , ( 2020 ) has surprised analysts in terms of its resilience .
In addition , the rent vs purchase equation has shifted to favour buyers , which is having a significant impact on activity in the local housing market .
Homeowners around the world have unquestionably reevaluated their lifestyles and in particular , their living spaces . According to Lightstone , many countries from the USA to Australia , are seeing a reverse migration as remote working becomes a permanent option across many job sectors and industries . This is resulting in a steady increase in movement to smaller cities and towns where quality of life , family and affordability are highly valued . Lightstone also points out that in South Africa , the trend is more about the more balanced lifestyle , with home buyers in their late 20s and 30s and early retirees leading the coastal buyers .
18 DECEMBER / JANUARY 2021 SA Real Estate Investor Magazine