What lies ahead for the South African property market?
The pandemic had a significant impact on the South African property market, with a substantial shift towards semigration. The market has also seen many first-time buyers with affordable interest rates, particular locations and a shift to coastal areas gaining popularity.
Residential property very active throughout the pandemic
According to Hayley Ivins Downes, digital head at Lightstone Property, the residential property market rallied during the pandemic and is still very active. “Sales increased and bank loans increased with the lowest interest rates in 50 years. This phase encouraged people to purchase rather than rent, which is excellent for sales. The last two years also saw building plans with the highest increase, as people bought properties and plan to build their own homes.
“The residential property market peaked in the second quarter of 2021, with an increase of 5% in homes bought in the luxury market. The areas of demand are as always location, location, location. There is a preference for estates and properties in coastal areas.
“This sees a good phase for banks because of the application in the home loans sector due to the buoyant market. The lockdown didn’t influence the markets. People began working from home and this new view that you can work from anywhere lead to semigration (where buyers sell their properties and buy a new property, often even in a different province). This created a lot of movement within the property market; and even areas that are low in stock are now active markets.”
Semigration to a better quality of life
People are moving away from the concrete jungle and seeking a better quality of life. This especially intensified during the pandemic, with a 38% increase to 43% influx of people especially moving from Gauteng to the Western Cape – many more than in previous years. “The big changes came in the age group 46 years and upward, where people are economically settled in their careers and want to make a change and can afford to move. The second biggest impact came from the 36-49 years age group, the family-orientated group that wants a different lifestyle.”
Location, location, location
The location still holds true. Areas that have been doing well are continuing to do so. “It is important for buyers to know that they are buying an investment. Especially estates are becoming very popular, as well as coastal areas.”
The various scale predictions, with property inflation and possible further hikes, will impact the level of buying. Because of all the properties being bought, the rental market took a dip as the buying market picked up due to interest rates. The rent-to-buy and buy-to-let options are increasing.
Most activities in smaller towns
Most activities and transactions are happening at the lower end of the property market (under R800 000). The market in smaller towns is soaring.
Residential property remains a good long-term investment and it is still a good time to invest, with lower interest rates making it affordable. Fuel increases, electricity and the interest rate may have an impact in the coming months.
Commercial/industrial space and trends
Gemma Moore, director at De Leeuw Valuers, says in the commercial sector remote working resulted in smaller spaces needed. “The hybrid model became very popular, but people still want to interact with people, although they appreciate the flexibility.”
Office rentals are now continuously under pressure, as people prefer to work from home. This leads to an increased demand for smaller offices and shorter leases.
New technological trend
In the industrial sector, logistics remain strong and rentals haven’t decreased much. The technological trend is that companies become more flexible and adapt to changes. “Going forward, the next few months will be exciting in commercial and industrial areas. Offices are being converted into smaller spaces, as this is now the preferred trend.
“The unreliable Eskom power supply remains a critical concern, as this is not sustainable in the industrial sector. Along with increased operating costs, conflict in Europe, economic pressure and rates and taxes, the growth rental remains under pressure. Overall, it is important to remain optimistic about the changes because it creates new opportunities.”
The shifting to work hybrid created exciting opportunities and the demand for smaller rental spaces that are closer to residential areas is trending. This puts pressure on rentals. “It is also important to note that a company culture cannot be built virtually, and the young working generation needs to gain critical knowledge in a physical working environment.”
Keeping risk management in mind
Vuyiswa Ramokgopa, chief executive officer, entrepreneur and non-executive director, confirms that the pandemic is a critical factor that influenced the market. “The socio-economic impact must be controlled, and investors must be aware of traditional investments and external factors that impact the risk profile of investments. The recent hike in interest rates has an impact, but buyers don’t need to panic about the hike as it is not nearly where we were. “
Student accommodation in high demand
Student accommodation is in high demand. “This is a sector with many opportunities. Rates and taxes and service delivery have a direct impact on the property market in the regional and national markets. It is crucial to have a reliable power supply and properly managed rates and taxes, as it has an impact on the vibrancy of the property market.”
Covid-19 had a severe impact on students and the facilities that influence this segment in the market, but students are returning. It is important for students to be on campus and not only have a virtual learning experience. Shared accommodation is needed, and the owners must manage their cash flow and rent to holidaymakers when not occupied.
Constant activity in the markets
Many jobs have been lost since the start of the pandemic and the stock market is under pressure, but the listed property sector showed recovery and improvement to be listed on the stock exchange. This sector is on the path to recovery. “There are so many moving parts in the property market, with many new first-time buyers and exponential growth in this sector. There are constant market activities, and it must be remembered that people will be affected by market shocks and thus act accordingly.”