With interest rates at 47-year lows and more distressed sellers wanting to offload their homes, SA’s housing market should, in theory, be a key mechanism through which liquidity is provided to the country’s frail economy.

In practice, this isn’t happening and there are two main reasons. Firstly, the seven-week-long Covid-19 lockdown has no doubt created financial stress and job losses for many, creating an affordability problem for housing purchases.

With between three million and seven million job losses estimated by the National Treasury as a result of the lockdown (depending on its severity), there will probably be more distressed sellers of residential properties than new buyers.

The second reason is that the government is not allowing real estate agents to offer their full services during a countrywide Level 4 lockdown.

At this stage, estate agents (and the broader real estate sector) are considered to be Level 2 service providers during the lockdown – the sector is restricted to operating via telephone calls or online for social distancing purposes. This means that real estate agents cannot invite potential buyers to physically view a house for sale.

“We can show properties for sale on the internet. A potential buyer can look at a property online, phone a real estate agent to enquire about it. We can only negotiate about the sale process online,” Samuel Seeff, chair of the Seeff Property Group, told Business Maverick.

“This is impractical because real estate is a tangible product and people want to get a feel for it, see it and imagine themselves living in a particular space. Many buyers are putting home purchases on hold subject to viewing a property,” he added.

With SA’s housing market being in a standstill and no indication from the government on when estate agents will be allowed to go back to work, housing sales are falling. Seeff said initial figures indicated that housing sales volumes in April were, unsurprisingly, down 70% compared with the same period in 2019, adding that volumes will worsen in May if estate agents are not urgently allowed to conduct house viewings.

Rental woes

SA’s rental market, which provides most of the country’s housing needs, is in a similar difficult situation because estate agents are also barred from showing rental properties to potential tenants. This situation was worsened by lockdown rules that didn’t allow homebuyers and tenants since 27 March to move into homes, which they have either purchased or signed a lease agreement on.

“For tenants and landlords, this created a big problem. Tenants, who have had their leases expire before or during the lockdown, were not leaving their premises. And landlords insisted that they pay rent on leases that had expired. Tenants couldn’t take occupation of a new property because they were not allowed to move by the government,” said Seeff.

On 7 May, Co-operative Governance and Traditional Affairs Minister Nkosazana Dlamini Zuma gazetted new rules that allow tenants and homeowners to move into a new house during a Level 4 lockdown – but until 7 June. This applies to people who have entered into a new lease agreement – either before or during lockdown – and those that have bought a new home and the transfer of the property has already gone through.

Tenants and homeowners may only move “household furniture and effects” into a new home on a once-off basis – even across provincial lines. But those moving between towns will need permission from the police in the form of a travel permit.

Plead to the government

Real estate industry players have written to Human Settlements Minister Lindiwe Sisulu and Trade and Industry Minister Ebrahim Patel, asking the duo to allow estate agents to offer full services and get sales moving again during a Level 4 lockdown.

Three representatives of the industry that Business Maverick spoke to said the office of Sisulu and Patel had acknowledged the receipt of their letters but didn’t respond to the contents of the letters.

Dr Andrew Golding, chief executive of the Pam Golding Property group, said real estate agents represent a low Covid-19 health risk because house viewings “can be limited by appointment to one agent, with all the relevant safety and sanitising measures in place”. 

Golding said the same safety and social distancing measures put in place by industries such as retailers and banks that are allowed to operate during the lockdown can “easily be applied at real estate offices”.

In his letter to Sisulu, Adrian Goslett, the regional CEO of RE/MAX, reminded her about the real estate sector’s importance for SA’s economy.

“Real estate in isolation contributes about 5% of SA’s GDP and has approximately 42,000 people that work in the residential real estate sector. There are many other organisations, industries, and businesses that rely heavily on the real estate sector to trade. Banks, originators, conveyances, and many more feed off real estate. Without us, their industry stands still. If they stand still, they will lay off people and further contribute to rising job losses,” says Goslett.

Seeff agreed with Goslett, saying if the government continues to restrict the services of estate agents by June or July, 50% of the real estate agency industry will collapse because small and independent agencies, which rely on commissions from housing sales to stay afloat, will struggle to keep their doors open.

The freezing of the real estate industry also means the government is losing much-needed tax revenue including transfer duties tax from the purchase of residential properties, capital gains tax on the sale of primary properties, and tax on the commissions that estate agents receive. According to the National Treasury, property taxes in the 2019/20 fiscal year amounted to about R16-billion.

Deeds registry offices

The government has allowed deeds registry offices around SA to reopen during a Level 4 lockdown. But many offices haven’t yet reopened.  Opening up deeds offices is expected to help register and process a backlog of thousands of property deals concluded in February and March.

Goslett said property to the value of R20-billion registers in the deeds office every month, which could create “much-needed liquidity in the market for buyers and sellers” and in turn, boost the economy. This is if the office is urgently reopened and estate agents are allowed to fully facilitate the buying and selling of properties.

“If people are unable to sell their property, then they cannot raise any capital. The number of distressed sellers is on a rapid rise. These homeowners will not have access to finance unless real estate services are allowed to operate,” he said. BM