Sellers, be ready to capitalise on pent-up demand post-lockdown
Category The Property Market
There is no doubt that the post-Covid-19 lockdown recession will weigh on the property market, but rather than impacting negatively, we believe that the emergence phase will be characterised by pent-up demand in the primary residential market.
While we face an unprecedented time, we do expect to emerge from the lockdown with a "perfect storm" for homebuyers who are eagerly waiting to take advantage of market conditions, especially in the sub-R1.5m (up to R3m in some areas) sector.
A confluence of events has created a rare window of opportunity not seen for over a decade and purchasing conditions could hardly be more favourable. Transfer duty is down across the board and we believe that the favourable lending climate will continue as banks will compete for business.
The March interest rate cut of 1% means that buyers can save between about R650 to R1,300 per month on home loans of R1m to R2m. Combined with the flat price growth, this means that buyers can get into a property or suburb which they might not have been able to afford a year ago.
Stock levels are higher than what they have been for some time and after an exhaustive wait, sellers are keen to sell which means that buyers will be able to negotiate further discounts.
It is for example interesting that our international partner, Hamptons International reported that post-Brexit they experienced two of their best months in terms of trade for December and January.
Good demand expected
While we don't expect volumes to spike drastically, we expect a good level of demand. Our branches have already done deals "virtually" with price agreed, but the offers are subject to physical viewings. Once the lockdown lifts, the agents can quickly move on these and other potential deals.
Naturally, prices will come under pressure, especially at the upper end of the market where we anticipate that buyers will remain in the holding pattern that we have seen over the last 18 months. This, even though buyers can negotiate strongly in this sector of the market, up to 20% and more off the asking prices.
The depreciation of the rand should be a favourable boost for foreign buyers as they can get substantially more value for their US dollar or British pound given that a property of R12.5m could now cost around R9m. However, it is not likely to result in a flood of buyers. The economic fall-out of Covid-19 along with a decline in demand for second/holiday homes internationally means that we are unlikely to see any notable uptick in sales above R20m or foreign sales for the foreseeable future.
Overall, the property market will remain a bellwether for the challenges in the country and will reflect the broader macro-economic trends, but ultimately people always need somewhere to live. Those who want to buy, will do so and will have plenty of motivation to do so.
Author: Samuel Seeff