Property in SA – the year that was and what is expected

Property in SA – the year that was and what is expected

MAIN IMAGE: Samuel Seeff, Chairman of the Seeff Property Group; Dr Andrew Golding, Chief Executive of the Pam Golding Property Group

Danie Keet

While there does appear to be a mild tapering off of activity in the housing market during the second half, 2021 was a great year for the property market.

According to Samuel Seeff, chairman of the Seeff Property Group, the market continues to outperform expectations despite the challenges of the Covid-19 lockdowns, July-riots and lack of GDP growth as illustrated by the Q3 figures of a disappointing economic decline of 1.5%.

“Most areas in the Seeff Group have achieved the highest sales in three years and as a group, we end this year with the highest sales turnover in our 57-year history – 36% higher than last year (2020) and 16% higher than our last record year in 2014.

“Aside from strong performance across the urban, country, and coastal markets, Seeff has seen a significant uptick in the luxury areas where we have a strong footprint and are regarded as a market leader. Although the bulk of sales are driven by freehold houses, we have also seen good activity in luxury apartments on the coast, especially areas such as the Cape Town Waterfront Marina where we have made two high value sales this year (R45 million and R55 million).”

The group alone has achieved over ten sales above R20 million including, achieving some of the highest prices such as R55 million and R60 million in Plettenberg Bay (both record prices), R55 million and R45 million at the Waterfront (both the highest since 2013), R52 million in Camps Bay (record price for an agency sale) along with a further R32,38 million and R28 million sales in the suburb, R40 million in Fresnaye, R23,5 million and R26 million in Bishopscourt and R20 million in Constantia.

Sales to foreign buyers and SA Expats are also up considerably, driven by a pandemic-induced desire for better surroundings. Cape Town sales to foreign buyers (for the market as whole) looks set to end on over R2 billion, twice as high compared to 2019 and almost R500 million higher than last year.

Seeff has made several high value sales to foreign buyers. The activity is spearheaded by buyers from the UK, Germany and the rest of Northern Europe as well as the USA and Middle Eastern countries such as the UAE. They have also seen more buyers from elsewhere on the African Continent this year including Angola, eSwatini, Nigeria, Zimbabwe, Congo, Zambia, and Malawi.

Positive 2022 market

Seeff says the outlook for the market into early 2022 remains positive and the group expects more of the same as this year.

“Notwithstanding the recent increase, the interest rate will continue to be the game changer for the market. We expect the interest rate to remain flat and would call on the fiscal authorities to limit the increases going forward as property is such an important element of the full collective of the economy. It has a significant multiplying effect with widespread economic and skills benefits well beyond just the agents, buyers, and sellers.

“As an industry, we really do hope that the interest rate will remain flat, and any increases will be kept to a minimum during next year in which case we can still look forward to another very successful year for property.”

Covid influence

With the interest rate and favourable mortgage lending conditions set to continue into 2022 the group expects that first-time buyers will continue taking advantage of the opportunity to get out of the rental market and into their own homes.

Given the sustained good demand in the market, sellers will be able to sell and in turn also taking advantage of the positive conditions by taking the opportunity to move to a bigger house or better neighbourhood.

“Lifestyle will remain a strong driver of demand in the market. The strong trend that we have seen from buyers looking for homes and locations which offer a better lifestyle will continue into 2022. This will include more foreign and wealthy buyers looking for second homes and more semigration of people moving to areas where they can enjoy a better lifestyle yet with the advanced technology, still able to work remotely and remain economically active,” Seeff said.

Commenting on the year that was, Dr Andrew Golding , Chief Executive of the Pam Golding Property Group, stated that despite the uncertainties surrounding Covid-19 and the ensuing lockdowns, the residential property market has proven to be one of South Africa’s more resilient sectors, despite the challenging trading environment.

He said that while the unexpected strength in the housing market last year was catalysed by first-time buyers responding to the aggressive interest rate cuts, in 2021 the national housing market was driven by a second wave of demand – fuelled by non-first timer buyers (repeat buyers), as first-time buyers felt the impact of the weak economy and the benefits of the rate cuts began to fade.

Zoom boom

“These repeat buyers were motivated by the interest rate cuts, but also by the ability to relocate due to the option to work from home and the desire for a larger home and/or more relaxed lifestyle in a more affordable home in the peripheral suburbs of the metro areas and smaller towns traditionally considered retirement or holiday destinations – resulting in a so-called Zoom Boom. This convergence of factors resulted in an unexpected surge in residential market transactions, despite the severe economic disruptions caused by the pandemic.

“This desire to relocate was partly in response to lockdown, which made a larger house a necessity due to work-from-home (WFH) and home schooling, and outdoor space more appealing. The ability to WFH made it feasible to consider suburbs and towns that had previously been too far from schools and the workplace, but which typically allowed homeowners to buy larger, more affordable freehold homes, which in turn saw a temporary pause in the long-term structural shift in the national housing market towards sectional title homes,” he argued.

Golding said the residential property market remained robust during the first half of 2021 – both in terms of price growth and activity levels. The total number of sales recorded during the first half of the year, approximately 128 000 units, is the highest sales number recorded during the first six months of the year over the past five years. This shows surprising resilience in the national housing market, despite the economy struggling to recovery from the worst recession in a century.

“From a Pam Golding Properties perspective, for the group’s financial year to date (March to October 2021), sales turnover is 55% ahead of the same period during the previous financial year and on a par in terms of units sold. Meanwhile, for the calendar year to date (January to October 2021), sales have increased in terms of turnover and volumes across all price bands, including the luxury homes market from R10 million upwards which has experienced a resurgence, where the company has concluded sales transactions for a range of high-end residential property achieving prices significantly more than R50 million.

“We anticipate that many of the trends triggered by the pandemic will gradually begin to fade and/or reverse over the course of 2022 and beyond. For example, we experienced a temporary halt in the long-term structural shift in housing stock from predominantly freehold to predominantly sectional title – reflecting the ongoing urbanisation of SA’s predominantly young population.”

According to Golding some of the trends and factors that will impact the housing market into 2022 are:

Interest rates: These are likely to be moving higher but the slow pace suggests this will remain a benign environment for the housing market with interest rates expected to rise gradually in small 25bps increments. However, the sluggish economy is likely to prove to be a headwind.

Affordability: We have already seen the surge in FTHB demand fade as the effects of the aggressive interest rate cuts early last year abate. Although interest rates are unlikely to prove a significant impediment, consumers are dealing with the economic fallout of the pandemic, loadshedding and subdued growth prospects. That said, SA’s young population does mean that there will always be a steady demand from young buyers.

Co-living and merging of residential and commercial: The co-living trend continues to gather momentum despite initial fears that the pandemic would bring this to an end. A key theme of the pandemic is that businesses need to be as flexible as possible, so co-working remains popular, as does co-living – in micro units with shared living spaces which offer community and reduced costs and maintenance.

Conversion of office space: We have seen the conversion of office space into residential and/or the mixed-use model for some time but now as businesses become more flexible to survive in the pandemic economy, there is a focus of trying to tap into as many markets as possible, namely office, retail, residential, gym etc. Examples include two businesses using the same venue at various times of the day, and office space offering a food hall instead of a reception area to increase the appeal of the workspace. Pure office space is likely to be under the most pressure of all sectors, so it is anticipated that much of this will have to change – often including a residential component.

Business hubs: It is becoming apparent that even if people only come to the office occasionally the office needs to be in a prime and accessible location, making location even more important than before. This implies a focus on central cultural districts in recognition of the fact that people are not there purely for the business but acknowledging the fact that to collaborate they may need physical connection.

Well located apartments in a business hub continue to offer an appealing lifestyle to many young buyers, with the buzz of city living with bars, clubs, coffee shops, restaurants and other entertainment and numerous work opportunities, or at least co-working spaces and proximity for start-ups and SMMEs.

Fading Zoom Boom: People are gradually returning to the office amidst a realisation that there are certain types of work which require physical interaction with ones’ colleagues. There is general agreement that we are unlikely to return to the five-day at the office workweek, adopting some type of hybrid model instead, the realisation that one may well be required to be present in the office three days a week (at least) has made people reassess the reality of living a few hours’ drive away from their place of work.

However, the longer term semigration to the Western Cape will continue as it remains the one province that is still able to deliver.

Rent or buy? The shift from renting to buying was at its peak in 2020 as FTHB took advantage of the interest rate cuts. The need to be as flexible as possible in uncertain times will undoubtedly increase the appeal of rental. South Africa has a strong tradition of home ownership which remain intact, including first time buyers and those seeking value for money.

Estates remain sought after: Homes in estates remain in high demand and buyers will pay a premium for a sought after, secure estate

Multi-generation living: The need for flexibility amidst challenging economic conditions suggests that multigenerational living will continue to gain in popularity.

Going off the grid: Where affordable for homeowners, there is an ongoing desire to go off the grid, even if partially, with the installation of energy and water saving solutions which are now becoming the new normal amid rapidly rising costs of electricity and utilities coupled with poor service delivery, and partly because climate change is becoming a critical mainstream issue.

2022 outlook

“We remain optimistic regarding the country’s residential property market, which is expected to remain active as the long-term appeal of this sector holds strong. This is especially so since the lockdown has inadvertently created the rationale for a wave of new reasons for relocation and property acquisitions, from the upsizing for additional space due to work from home scenarios to lifestyle moves to more appealing destinations further afield. If you can live and work anywhere, it makes sense to live somewhere with a better quality of life in a more desirable location.

“With a population of predominantly ‘young’ buyers, many of whom are likely to prefer life in a city hub, the increasing demand for accommodation to buy is helping drive activity in the residential property market, filtering upwards across all sectors of the market, boosting activity in middle markets and higher price bands as some existing homeowners upscale, and even creating stock shortages in high-demand areas,” Golding concluded.

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