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Tuesday May 04, 2021

Still good growth in bricks and mortar

Despite economic ups and downs over the past decade, investing in the property market has seen fairly steady returns

Ten years ago, the average residential property in South Africa sold for R790 000. Today, that same average property is selling for R1.267 million, almost R500 000 more - despite a global pandemic that saw South Africa's economy restricted under lockdown.

"The first thing that the figures make obvious is that the South African property market has not crashed," says Schalk van der Merwe, franchisee for the Rawson Properties Helderberg Group. "In fact, given the utter turmoil occurring around the world, our average house price growth has been remarkably stable and above inflation.

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"We're definitely not at the high point of a cycle, but we're also very far from our lowest moments, and trends suggest growth is heading upwards, not down." Interestingly, the trends that dominated the property market in 2011 are still very much in play today, including the growth in demand for retirement estates and sellers struggling in a buyer's market.

Between 2011 and this year, however, it was a case of all change for the market as South Africans adapted to shifting needs and rollercoaster economic conditions. In 2013, for example, it made more sense to rent than buy a property, a phenomenon that has been turned on its head over the past few months.

Another point to note is that, from 2015, technology was slowly introduced into the global property market and the first virtual reality searches were used for home viewings. Six years later, technology has become the norm for use by estate agents as well as buyers and sellers. Virtual reality goggles, however, are yet to be implemented on any noticeable scale - if at all.

Annual trends and house values from 2011 to 2021

2021 Average sectional title home price: R1 267 744 Average house price growth: 4.5% (as at the end of March)

Overview: It is still early days, but so far, this year saw the residential buying market start strongly following last year's lockdown. Buyers still have the upper hand, while sellers are being forced either to accept much lower prices or hang on to their homes until conditions improve. The low-interest rates are encouraging first-time buying activity which is reducing the number of good tenants available to take up the large number of vacant rental properties on the market.

Trends

Remote working becomes a more regular occurrence or even a permanent set-up for South Africans, leading them to consider a more formal workplace within the home.

Landlords have to do more to woo and keep good tenants, including not increasing rents but rather reducing them.
Retirement property developers are forced to rethink their designs and offerings in a post-Covid world which requires more social distancing.

Homeowners place more importance on space, both inside and outside the home.

Many people move away from the cities because remote working allows them to live wherever they want to live.

2020 Average residential property price: R1 213 153 Average house price growth: 3.7%

Overview: The property market came to a standstill last year following, first, the complete shutdown of the industry, at the introduction of the lockdown, and then Deeds Office delays. Fortunately, though, the pent-up demand as a result of the restrictions saw the industry rebound once it was allowed to operate fully. This, combined with declining interest rates, meant the year ended on a high for the market.

Trends:

Affluent investors made an early move from equities to luxury bricks and mortar, which is regarded as a safe haven in turbulent times.

Landlords struggled to collect rents from tenants due to financial difficulties related to reduced salaries or job losses.
The banks were keen to grant new home loans.

Many buyers and tenants were looking for properties with more space to support social distancing and allow more comfort at home.

2019 Average residential property price: R1 169 868 Average house price growth: 3.1%

Overview: This year was dismal for property with the harsh economic climate spewing out low - and declining - house price growth, rising levels of emigration and local markets that were either stagnant or barely ticking over. Load shedding was also a major concern for South Africans. However, the Rugby World Cup win was a highlight that helped restore confidence in the local market and attract the attention of foreign investors. The interest rate cut in July helped bolster the market.

Trends:

Moody's downgrade of the country's investment status from "stable" to "negative" was a knock to investor confidence in the local market.

Smaller units started coming on stream to meet demand.

Banks were lending up to 105% and aggressively competing for business.

Statistics revealed that, for the first time, single women were the biggest group of property buyers in South Africa - ahead of couples and single men.

2018 Average residential property price: R1 134 693 Average house price growth: 3.5%

Overview: 

The start of the year saw an improvement in consumer confidence and a subsequent boost in market performance but this was short-lived. Public policy lacked direction and controversial issues, such as the prospect of land expropriation, gave investors and homeowners the jitters. Homes took longer to sell. Price growth in Cape Town continued to slow, or normalise, as economists say.

Trends:

Land reform processes saw jitters among many homeowners following President Cyril Ramaphosa's State of the Nation address.
Retirement development accelerated.
The VAT increase and fuel hikes impacted on household affordability levels.
People looked for smaller properties closer to their workplaces and other conveniences in order to reduce living costs.

2017 Average residential property price: R1 096 322 Average house price growth: 3.8%

Overview: This year was said to be a buyer's market as house price growth remained just over 4% from January to December. This was the year the drought in Cape Town coincided with a slowdown in house price growth. Traffic congestion and petrol prices saw more buyers looking for properties close to their workplaces. The year was volatile on the political, social and economic fronts, with junk status downgrades hitting the property market hard.

Trends:
Activity in the below R1m price band remained high.
First-time buyer numbers remained low in Cape Town but high in Gauteng.
Micro-apartments made their debut in Cape Town.
Estates were still a major drawcard for buyers.

    
 

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