Business Maverick

HOUSING MARKET BOOM

The pandemic is helping to fuel property purchases, especially in the luxury segment

The pandemic is helping to fuel property purchases, especially in the luxury segment
A general view of houses for sale and for rent during lockdown level 4 on May 12, 2020 in Cape Town, South Africa. (Photo: Gallo Images/Jacques Stander)

Since the start of the Covid-19 pandemic, South Africa’s housing market has become a bright spot in the economy. According to figures from property analytics firm Lightstone, there were about 128,000 homes sold in the first six months of 2021. This is the highest number of homes sold over the past five years.

Buying a house isn’t what it used to be. 

Before the pandemic, many homeowners were downsizing, trading their big homes with pools for smaller abodes for financial reasons or because they have too much space after becoming empty nesters. 

But the opposite has happened during the pandemic. Buyers are moving into larger homes and relocating from urban areas to more tranquil parts of the country — especially smaller towns in the countryside. 

Industry players call this the “zoom boom” trend, which refers to a relocation fuelled by an increase in the number of people working remotely, making it possible for them to live in areas that were traditionally considered as retirement or holiday destinations.  

After more than a year of cabin fever-inducing lockdowns, large homes with sprawling outdoor space have become appealing to buyers. 

Since the start of the pandemic, SA’s housing market has become a bright spot in the economy, with stronger house price growth and property sales being reported by industry players at a time when the economy and labour market continue to deteriorate. 

The resilience of the housing market and home sales during the pandemic has happened in two waves. 

The first wave started in early 2020 when the Reserve Bank aggressively cut interest rates to a near 50-year low, incentivising first-time buyers to enter the home ownership market. First-time buyers have largely bought homes valued at between R650,000 and R2.5-million.

The second wave, which is now under way, has seen buying patterns shift to bigger homes in higher price brackets. Low interest rates also made it affordable for existing homeowners to relocate or upgrade to larger homes. 

Higher property sales

Industry players say the first wave (first-time buyers) has cooled off and the second wave (purchases of larger and expensive homes) has been mainly responsible for stronger home-buying activity in 2021. 

According to figures from property analytics firm Lightstone Property, there were about 128,000 homes sold in the first six months of 2021. This is the highest number of homes sold in the past five years. 

The collective value of these 128,000 homes was R153-billion, higher than the comparable period in 2019 (R113-billion), and R115-billion in both 2017 and 2018.

housing market boom

(Source: Lightstone)

“This shows surprising resilience in the national housing market, despite the economy struggling to recover from the worst recession in a century,” said Andrew Golding, chief executive of the Pam Golding Property group. 

Pam Golding has seen its sales turnover (revenue generated through property sales) increase by 55% from March to October 2021 compared with the same period last year. For Seeff Property Group, 2021 has been its best year of sales in its 57-year history. 

Both Pam Golding and Seeff have seen higher sales in top-end properties, valued from R10-million upwards. In recent years, this category has suffered the most when SA’s economy and investor confidence began to deteriorate. But it has staged a recovery, especially in the Western Cape. 

Seeff chairman Samuel Seeff said the company has achieved record sale prices of up to R55-million and R60-million in Plettenberg Bay, R45-million at the Waterfront (the highest sale since 2012), and R52-million in Camps Bay.

Pam Golding has achieved similar top-end sales in the Western Cape, but said the robust buying activity has also been seen across the country. The company sold a penthouse for R33-million in Steyn City (Gauteng), a home in Johannesburg’s Sandhurst for R35-million and a home at a KwaZulu-Natal gated estate for R22-million. 

Outlook for 2022

The key question is whether SA’s housing bounce will be sustainable and continue into 2022.

There are already signs of a slowdown, especially in house price growth around the country.  House prices grew by 3.7% for 2020 as a whole. After factoring in average consumer price inflation (3.3% in 2020), house prices grew marginally by 0.4% — a decent performance considering that other sectors of the economy were in decline. 

Andrew Golding expects house price growth will average closer to 3% in 2022. 

Buying activity might slow down over the next 12 months as the recent 25 basis points increase in interest rates (taking the prime lending rate to 7.25%) and the possibility of more hikes, will start to bite consumers in terms of affordability.  

The resurgence of Eskom blackouts, drastic petrol price hikes and rising consumer inflation could also affect the housing market, said Seeff. DM/BM

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