‘Floods will affect property prices’
PROPERTY experts say that the recent floods will have a long-term negative effect on property prices in KwaZuluNatal.
Andrea Tucker, director of MortgageMe, said: “Tragedies like this are long-remembered, and this makes people nervous to invest in areas where there is so much uncertainty of when another tragedy like that would hit.”
Tucker, whose company helps people get the best deal on home loans, said people did not only associate KZN with the floods but also with the unrest in
July last year. As a result, property values were likely to decline in those areas most affected.
According to her, potential buyers were likely to adopt a wait-and-see approach. Her advice was to not act impulsively.
“Making a short-term decision to sell might have longer-lasting implications, like the loss of wealth. The longer it takes for the government to manage and control the effects of the floods and last year’s riots, the higher the risk to the economy and home prices.”
She said some people would also opt to leave the province.
“The idea of semigration first introduced itself after the first wave of Covid19. The riots and floods are expected to nudge many more families to other provinces – either for the assumed safety of another city, or due to a provincial government’s ability to respond to devastated communities and the related infrastructure.
“Don’t make any life-changing decisions to sell your house or to semigrate until a few months after the most recent tragedy. We can only assume that there will be negative impacts but we won’t know the full extent until six months afterwards or even longer.”
Historically, KwaZulu-Natal was popular for those wanting a holiday home by the sea. However, she said that in recent years the demand for a second home by the coast had fallen.
She warned that those who rented houses to tourists over the holiday season might struggle to do so now. Those who had bonds on these properties that they needed to fund would be particularly hard hit.
Tucker said the commercial property sector, in particular office and warehouse space, had also taken a knock.
“Office space has had a tough time in the past two-and-a-half years as people started to work from home as a result of Covid-19. It was something we had never done before and we’re still trying to find the best way to balance working from home and an office.
“If you’re looking at filling office space you’ll need to think about keeping staff safe as well as looking for a property that is safe if a natural disaster hits.
“There will no doubt be an impact on the price per square meter and we expect what is now a lower rate to only move upwards in the long term.
“Warehouses are once again facing operational challenges and supply-chain disruptions. We will all feel the impact of the crisis in the Durban harbour irrespective of where we live.”
Malusi Mthuli, KZN provincial head of FNB Commercial Property Finance, agreed that the recent floods had hindered the recovery that was under way after last year’s unrest.
“There’s a strong likelihood some potential buyers will be pull out of sales if the properties they were looking at have been damaged. It might take quite some time for a buyer to regain confidence in a flood-damaged property.”
Mthuli said it would be a timeconsuming and costly exercise for the seller to re-establish a level of confidence with buyers or the market at large.
“Last year’s unrest had a limited direct impact on the residential sector, except that buyer’s choices have changed significantly in favour of security estate homes rather than open suburban dwellings. The floods will result in an additional premium to estate homes that are already pricey.”
He felt that the KZN market was resilient and would overcome the latest challenges.
From a commercial property perspective he said: “The process to rebuild the commercial sector to what it was before the July 2021 unrest is still not complete and the recent floods have stalled it a little longer. Both tenants and landlords have suffered a great deal of financial loss. Landlords have a better chance of recovery but some businesses will, unfortunately, be gone for good.”
Mthuli said the only positive from the ongoing issues being experienced in the Durban harbour was that other port cities would benefit. This would include Cape Town and East London, and the Coega port.
Meanwhile, TPN Credit Bureau found that the third highest tenant defaulters lived in KZN.
The bureau said this indicated the impact the July unrest had had.
“Only 80.57% of tenants were in good standing with their landlords at the end of 2021, compared to a national average of 81.4%.
“Full title property values in Durban have dropped significantly in the last few years.
“At their peak at the end of 2018, the average full title property value was R1.88 million. This dropped to R1.62m at the end of 2021 while gross yield was 5.7%,” the bureau said in a property report last week.
It found that although full title property values had been declining since 2019, a faster decline after the second quarter of 2021 was in all likelihood fuelled by the July riots.