There will be a buyers’ market for homes after lockdown, estate agents predict
The residential property market, like many industries, has been hit hard by the Covid-19 lockdown, with experts warning of a sharp drop in prices in the coming weeks.
Estate agencies and analysts are also expecting a huge oversupply of houses.
Grant Smee, MD of Only Realty, says that every part of the housing market will take a knock from a pricing point of view.
“The decline in prices will be affected by the length of the lockdown, the extent to which industries are limited in operation and how much relief through payment holidays, further decreases in interest rates and other interventions the government is able to put in place.
“I expect we will see the higher end of the market drop 20%-30% for several reasons, including affordability, demand and lack of foreign buyers.”
Samuel Seeff, chair of the Seeff Property Group, says: “While it is expected that there will be more movement in the property market, the economic fallout of Covid-19 will be that more property listings will flood the market as many property owners are forced to sell for financial reasons.”
It’s debatable whether many South Africans, especially firsttime buyers, will be financially healthy enough to get bonds to buy properties. Employees across SA are taking pay cuts.
Seeff says pricing is more important in an overstocked market. He says an estate agent is especially helpful when you want to sell a house as quickly as possible because you need to raise funds.
“Let your agent help you to set your asking price in the right range to sell in the shortest possible time,” says Seeff.
Agents will also compete fiercely for your property mandate. As a result, sellers should choose agents with a track record of operating and selling successfully in their area, “not just someone who promises a high price that will cost you in the long run”, he says.
Smee says properties in the mid-price range, priced at R1.5m to R3m, will decrease by 15%20% in some areas, with the affordable section of the market experiencing a 5%-10% decline.
“There might be some areas that will be less affected, but broadly speaking the economy, affordability of buyers, and amount of supply I expect in the market after lockdown means we will be in an extended buyers’ market for at least the next 18-24 months,” he says.
Herschel Jawitz of Jawitz
Properties says as a base case he expects house prices to decline by about 5% and transaction volumes by about 45% this year.
By comparison, in 2009 during the global financial crisisprices declined by an average 1.5%, according to FNB’s research, and transaction volumes by about 40%.
LOW INTEREST RATES
“We expect a deeper contraction this year because of the nature of the shock and the magnitude of the impact on labour markets. Recovery will likely be drawn out, due to pre-existing weaknesses in consumer fundamentals,” says Jawitz.
He said low interest rates, a decline in house prices and lower transfer duties, particularly in the middle-priced segment, will eventually support purchasing activity and facilitate a house price rebound in 2021.
There is also a large backlog of properties that need to be transferred for deals that have already been agreed to or completed.
Estate agencies and house sellers and buyers are desperate for the deeds offices in SA to become fully operational.
The department of agriculture, land reform & rural development responded to these concerns on Thursday, saying that the “level 4 regulations require that the department puts in place necessary health measures before the services can resume. These measures will ensure that clients and departmental officials are not exposed to any health risks.”
To increase sales, the property industry has turned to digital platforms.
“Tours of homes, paperwork and meetings with prospective tenants and owners are now being conducted online,” said Smee.
This trend follows an international movement, with 58% of buyers in the US market taking part in virtual house tours, according to that country’s National Association of Realtors.
But Smee says it won’t replace the human contact required in residential real estate.
Pam Golding Properties CEO Andrew Golding says: “Although Covid-19 and the ongoing lockdown have had a significant impact on the housing market, against the backdrop of an economy which was already in a recession and an already subdued property market, we are finding that the rapid adoption of new technology and ramp-up of our digital capabilities is delivering results and enabling the groundwork to be laid for the final conclusion of transactions.”
PROPERTIES IN THE MID-PRICE RANGE, PRICED AT R1.5M TO R3M, WILL DECREASE BY 15%-20% IN SOME AREAS
HOUSE PRICES ARE EXPECTED TO DECLINE BY ABOUT 5% AND TRANSACTION VOLUMES BY ABOUT 45% THIS YEAR