South Africa’s economy is in a stalled state due to the impact of the Covid-19 lockdown.
While the top priority is to keep the people of South Africa safe, there is the vital need to manage the disruption to peoples’ lives and the economy during this difficult time.
As the deeds office remains closed, analysis shows the Covid-19 pandemic is expected to bring mass job losses and heightened uncertainty as buyers delay their purchasing decisions, says Siphamandla Mkhwanazi, FNB Property Economist.
Added to the market outlook, Mkhwanazi, says the pandemic is expected to “have a sharp but short-lived impact on property markets, and that volumes tend to suffer more than prices”.
DTI acknowledge receipt of call for essential service status but no clarity yet
A number of businesses are champing for essential service status, as the state weighs a staggered return to business - the expected approach once the extended lockdown period is lifted at the end of April.
“Considering that shelter is one of four necessities to human life, along with food, water and clothing, it seems justifiable to argue that the real estate industry should be allowed to fall under the essential services classification and to continue operating to a certain extent,” says Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
“In fact, many countries around the world, such as Australia and the US, have allowed realtors to operate with limited restrictions."
Goslett, along with REBOSA and Better Bond have petition the Minister of Department of Trade and Industry (DTI) Ebrahim Patel and members of the National Command Council requesting certain real estate related services be declared essential and reinstatement of these services.
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“To date, DTI has written back to acknowledge receipt and had stated that the request is being considered.
Core concerns in the petition are for many families that are “unable to access the finance’ they were relying on due to the Deeds Office closure, those "possibly homeless due to being between transactions", as well as “thousands of real estate practitioners whose income has been reduced to zero during this period”.
Goslett says should the full opening not be possible, the National Command Council should "at least authorise the reinstatement of the services required to process already concluded real estate transactions”.
This will not require any customer-based face to face interaction, he adds - despite the industry using innovative digital technology to reduce the need for person to person contact.
“This will enable families who find themselves in a state of flux to conclude their transactions,” he adds.
House price growth slowing, property portals recovering
Preliminary FNB deeds data shows that market volumes have declined by an estimated 40% y/y.
“Interestingly, however, search engine data shows a rebound in web traffic to property portals in SA since lockdown - this is also a worldwide phenomenon. While too early to definitively draw conclusions, this could be an early indication of burgeoning bargain hunting by investor buyers and/or pent-up demand from first-time buyers looking to capitalise on potential distressed selling.”
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Thus, a sudden drop in house prices could unleash pent-up demand from first-time buyers and investor buyers (buy-to-let purchases). The historically low interest rates in the developed countries (close to 0% versus 4.25% repo rate in SA) will only galvanise this demand, and thus facilitate a swift rebound in prices.
In contrast to international housing markets, however, the overall recovery in SA will likely be drawn out due to pre-existing weakness in consumer fundamentals.
“While aggressive cuts in interest rates, and possibly a reduction in house prices, will eventually support purchasing activity, in the short term this will likely be outweighed by heightened uncertainty and second-round effects on the labour market.
“The uninspiring employment outlook effectively limits any prospects for such pent-up demand in SA,” says Mkhwanazi.
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