HIGH HOPES property will bounce back

The economy, already in the doldrums, has been battered by Covid-19. Does this mean residential developers and estate agents will shut up shop and go home?

Far from it. If the mood of property pundits is a reliable gauge, the sector might prove to be among the most resilient in the regional economy. They would talk it up, you’d say they have everything to lose if they don’t.

There’s no doubt, the data is bleak, prices will fall and margins will narrow, but the well-worn cliché about “location, location, location” has never been more apt. KwaZulu-Natal – especially coastal property and secure, gated living – could prove resilient.

FNB property economist, Siphamandla Mkhwanazi, says the impact of the lockdown is yet to be felt on the property market, but annual house price growth fell to 1,9% in April, down from 2,5% in March – the slowest pace since December 2009.

FNB PROPERTY ECONOMIST SIPHAMANDLA MKHWANAZI.

Since the lockdown, market activity has almost ground to a halt and preliminary data showed that volumes plummeted by around 60% yearon-year in April. FNB estimates suggest that GDP could contract by between 7% and 10%. This implies employment loss of at least 750 000. But, a raft of policies adopted to support the economy could help limit damage and set the stage for a rebound once the shock passes.

“We expect house prices will decline by around 5% and transaction volumes by around 45% this year. In comparison, prices declined by an average 1,5% and transaction volumes by around 40% in 2009 during the global financial crisis.”

Chris Tyson of Tyson Properties predicted the market was in for “some very tough times”. The economy was already under pressure before the pandemic and there would be a lot of uncertainty about job security that will impact the banks’ decisions to lend money.

CHRIS TYSON OF TYSON PROPERTIES PREDICTS THE MARKET IS IN FOR SOME TOUGH TIMES.

This will reduce the number of sales and affect property prices, which Tyson predicts will elicit a similar reaction to the global financial crisis in 2008, but not as severe because 2008 “came off a very buoyant market as opposed to the subdued market we have currently been working in.”

Charles Thompson, a developer of key projects – including large tracts of the Sibaya precinct – painted a rosier picture.

He said he hoped construction would get back to normal in a matter of weeks.

CHARLES THOMPSON, A DEVELOPER OF KEY PROJECTS, INCLUDING LARGE TRACTS OF THE SIBAYA PRECINCT, NORTH OF UMHLANGA.

“Construction is open air and we can work seven days a week and catch up lost time. A lot of the smaller builders who have suffered financially will be wanting to get back to work. Going forward, key property locations will retain value.

“If anything the lockdown has driven home issues around convenience and lifestyle. Big properties with lawns and pools are difficult and costly to maintain.” Thompson predicted property prices in key locations would increase because of interest rate cuts and inflation. “The property sector is a pillar of investment. I do see unsteady times, but guys with some cash will be investing.”

This was echoed by Shaun Toweel, involved in a range of mix-use developments in South Africa and abroad.

Toweel said real estate remained a fundamental wealth creator. “Although we are currently going through a dramatic economic meltdown and huge amount of uncertainty around Covid-19, the importance of the residential real estate sector still remains, as it provides individuals with shelter, access to amenities and jobs.”

If ever there was a beacon of hope for the property sector in KZN, it was arguably The Arch, perched on uMhlanga Ridge with panoramic ocean and city views

Marc Rosenberg, is a director of the Multiply Group, the main shareholder and key driver of The Arch in uMhlanga, a R1,3-billion residential, retail and hospitality development. The building is 80% complete, and before lockdown was weeks away from handover of almost half of the 200 apartments to residential owners (11 of the 23 floors in the residential tower).

MARC ROSENBERG IS A DIRECTOR OF THE MULTIPLY GROUP, THE MAIN SHAREHOLDER AND KEY DRIVER OF THE ARCH IN UMHLANGA.

If ever there was a beacon of hope for the property sector in KZN, it was arguably The Arch, perched on uMhlanga Ridge with panoramic ocean and city views.

Before lockdown there were 1 200 workers on site every day, working steadily to complete the last few floors, the Hilton Hotel fit out, and shop fitting in the retail and restaurant section.

Rosenberg said the development should be completed by year end. “I think we are still a beacon of hope in the city. We were in the last yards and the Covid-19 reality means we can align with the new demands around public health and safety, rather than have to retro-fit. “It is actually an amazing opportunity to fit out a smart tech building to the new realities of restricted access, security and health sensitivity,” adding that Covid-19 had deepened relationships with stakeholders that consequently made the development best suited to purpose and the new world.

“We are not blindly or naively positive. Our buyers aren’t financially distressed and we are very encouraged by our engagements. We haven’t had a single person pull out of their commitment. But the discussions are not just about spaces and making them safe. The development is the livelihood of many people from construction workers to commercial tenants to security and cleaners.

“We have to work with our stakeholders to bring them prosperity and to keep them safe. That means constant engagement and strict adherence to safety. If we regard ourselves in a private public partnership with the government, we have to take that responsibility seriously. We have optimism and hope based on substance.”