Letter from the editor

Letter from the editor

ALAN Simmonds, the uber talented 80-year-old journalist who survived Covid-19 twice, said something to me last week that remained with me after our conversation.

I can guarantee you, he said, the one thing that will still be here long after the pandemic is gone, will be property. And Alan, a man who has predicted many world events, is right.

We all need a roof over our heads, places from where we can work and get an education, rooms to eat, sleep, celebrate, and at times to mourn.

Much of the time these are bricks and mortar spaces and even though people have had a tough time all round – unemployment, a sluggish economy, growing debt, and a national Budget that failed to dazzle – the property industry continues to tick over.

Depending on which agencies you are talking to, some are doing exceptionally well, others are crawling along, but still with their heads above water and sadly there are some who did not survive the three-month 2020 shut down.

It has been a tough year globally on all fronts and yet reports such as Knight Frank’s forthcoming edition of The Wealth Report 2021, shows private capital was undeterred by the Covid-19 pandemic, with continued investment in commercial real estate around the world.

The volume of private capital invested globally was circa US$232 billion – 9% above the 10-year average, albeit down on 2019 levels. All this bodes well on a real estate stage even though there are no absolute predictors of what the future will hold.

However, future thinkers and astute industry heads know – no matter what Black Swan events may emerge (again perhaps) – there are ways to reinvent industries to make them more compassionate, successful and, well, as safe as houses.

Good luck!

Vivian Warby

Financial pressure driving house sales

BONNY FOURIE bronwyn.fourie@inl.co.za

Experts say the situation is similar to 2008, which could mean more homes coming on to the market later in the year

Most South Africans selling their homes are looking to downscale or rent.

LONG-TERM change is washing through the lives of South Africans and shifting the foundations of what we call home. People are downscaling, upscaling, relocating and retiring and the reasons behind their moves are many. Historically, most of those selling their homes downscale as a result of their life stage but, in these times, downscaling because of financial pressure is fast becoming the most prominent reason.

Life-stage downscaling and financial pressure downscaling account for a total of 44% of property sales, says FNB senior economist Siphamandla Mkhwanazi, noting that the volume of sales because of financial pressure is the highest since 2011.

“These are evident across all price buckets but more so in the affordable segments.”

In the under -R750 000 price band, sales because of financial pressure are estimated to have risen to around 30% following relatively severe labour market pressures with rising unemployment for lower-income earners, says Mkhwanazi.

He acknowledges, though, that many property disposals might also be because higher-income households are selling investment properties to alleviate financial pressure.

“There are also rising incidents of corporates disposing of property to alleviate cash flow and balance sheet pressures.”

Mkhwanazi adds: “Interestingly, the trend looks similar to the 2008 crisis, although at a noticeably lower level. If the trend continues to track 2008, we should expect more properties on the market because of downscaling and a peak between Q2 and Q3.”

While financial pressure is a stress for many homeowners, increasing numbers of properties in the R1.6 million to R2.6m price bracket are being sold as the sellers of these properties look to upgrade.

“We suspect that this is driven by the changing housing needs brought about by the pandemic and remote working and the less severe job losses among these higher-income earners.”

In Bellville, Cape Town, those who are downscaling often move in with their adult children, into retirement homes or into smaller townhouse or sectional title properties, says Morné Veer, franchisee of Rawson Properties Bellville. Most of the downscaling is undertaken by older people while younger families are upgrading. Very few sellers are moving out of Cape Town. In the Durban’s City, Berea and Sherwood areas, it is a different story, says Bradley Bougardt, franchisee of Rawson Properties in these areas.

“Most people are selling because of financial pressures such as job losses or failing businesses. These factors are influencing all price ranges.”

However, while some sellers are finding “great value” when buying new homes in their respective price ranges, more often than not they are entering the rental market or moving into shared accommodation with friends or their families. Most of those who move to renting are doing so temporarily as they recognise that property is a stable investment and they will buy again at some point.

“There is a huge shortage of jobs and business is in a wait-and-see situation for the most part.”

Of the sellers who are relocating, Bougardt says there is a growing trend towards moving to Gauteng for job opportunities or being transferred there.

He adds: “Very few buyers are upscaling but, those who are, seem to be upscaling relatively close to where they currently live.”

In Bryanston, Joburg, most sellers make the decision to sell for reasons of affordability and relocation, says Roberta Lee Dessington, sales and rental partner at Rawson Properties in the area. These reasons are seen throughout the various price brackets.

Sellers who are upscaling are doing so for more space due to home schooling their children or working from home.

“Those who are downscaling are moving into smaller homes close by – either rental properties to live in in the interim or moving in with their families... They are not buying locally unless they are moving provinces.”

Some sellers are renting with a view to emigrating, while others are renting until there is more certainty about the future.

“They have sold their biggest asset and are able to make quicker decisions if needed.”

Mkhwanazi says total emigration sales continued to pull back from the recent peak of approximately 18% in Q4 2019 to 11% in Q4 2020. In the higherpriced segments though – particularly the R2.6m to R3.6m bands – these sales have started rising. This could also be a result of delayed decisions because of travel restrictions throughout the year.

The Rawson agents say the buyers include middleaged people, young couples and families looking for bigger homes.

“There are also quite a few speculative buyers around as tougher times will produce better value for the savvy buying market,” Veer adds.

MOST SELLERS ARE IN GAUTENG

MORE THAN 116 000 properties were sold betweenAugust and December, reveals Lightstone data. Most of these – 59 943 – were freehold homes. This was followed by36 319 sectional title propertie sand 20 095 estate homes.

The provincial statisticsshow that the overwhelmingmajority of properties were soldin Gauteng. The figuresby province are:

GAUTENG 51 318

WESTERN CAPE 25 458

KZN 14 260

EASTERN CAPE 6 919

MPUMALANGA 4 851

FREE STATE 4 263

NORTH WEST 4 048

LIMPOPO 3 734

NORTHERN CAPE 1 506

Lightstone data also shows that most of the properties sold – 45 945 – were in the“mid-value” bracket (R250 000 to R700 000).

This was followed by the “high-value” category (R700 000 to R1.5 million) with43 781 sales and the “luxury”bracket (above R1.5m) with15 207 properties sold.