The current low interest rates – some claim the lowest in 50 years – have improved the affordability of residential property in South Africa and made up for the negative impact of the coronavirus pandemic on the economy as a whole.
According to Dr. Andrew Golding, chief executive of the Pam Golding Property group, while house prices have continued to show positive growth in 2020, on a real (inflation adjusted) basis they remain in negative territory. For him, this reflects an ongoing price correction in line with subdued national economic growth. The market segment of properties priced between R700 000 and R3 million has been the most active.
“Interest rates are expected to remain at their current low levels until late-2021 at least. This remains a positive for the market. However, it remains to be seen whether government will increase the tax burden in the 2021/22 National Budget as it attempts to contain its debt levels,” says Golding.
“While it is far from clear how the work from home vs office issue will be resolved in the long term, it appears that, overall, people will be freed to some extent from being completely office bound. This in turn means that many towns and suburbs, which previously were too far from work and schools and offering more affordable accommodation, are now feasible for homeowners.”
GOLDING IDENTIFIES 8 PROPERTY TRENDS
Work from home
“Lockdown was a social disrupter but also gave rise to a new approach to how we work and, more importantly, where we are most productive. While manufacturing and hospitality industries have no choice but to centralise, many people are now presented with promising options,” says Golding.
“Underutilised spare rooms are being redesigned as working hubs. For young professionals and first-time buyers, a sectional title unit with an extra bedroom, is likely to be an attractive choice. For families, a freehold home with good Wi-Fi connectivity in a peripheral area, retirement village or a country estate, solves the dilemma of choosing income generation over quality of life.”
According to FNB, data from the Deeds Office shows that younger buyers (below 35 years) now account for 43% of residential sales – up from 38% in 2019. The low interest rates coupled with the zero-transfer duty payable on properties up to R1 million significantly increased activity among first-time buyers, some of whom were formerly renting but now find affordable and appealing opportunities to gain a foothold on the property ladder. Furthermore, in the current environment, millennial buyers can get into a property or suburb that they might not have been able to afford a year ago.
Women make up most of the first-time buyers while men make up most of the repeat buyers. Sectional title and estate properties are particularly appealing to women buyers as they tend to offer better security.
Positively for home buyers, the deposit that financial institutions require from both first-time and repeat buyers is declining, averaging 7.0% for first-time buyers and 9.03% for repeat buyers.
The conversion model
Buying a property that required a deposit, mortgage approval, and dual household income to service repayments, meant that owning a home was out of reach for the majority of young South Africans.
The market has swung in their favour. First-time buyers are discovering that unwanted office and retail space must still earn its keep and a conversion to residential units, is a win for both sides. Precincts that were deserted after office hours now show signs of life as young people transform them into smart, urban hubs.
This is a global trend as more and more people move to co-living spaces. Essentially communal living, co-living brings together a community of people who live in small personal spaces and share communal areas like work areas and kitchens. The buildings are tech enabled and offer a variety of amenities. The primary appeal of co-living is that it allows people to live in areas that they could not afford in the traditional housing market.
Gated lifestyle estates
With many people now spending the majority of their time at home, working or studying, homes have evolved into “quarantine bubbles”. Homes on secure estates, with an abundance of safe open space and restricted access as well as a variety of amenities, are becoming increasingly popular among those taking into account potential future quarantine requirements.
Second tier cities and smaller towns
FNB data shows a sub-trend of homeowners reassessing their housing needs and preferences as a result of life in lockdown, with some relocating to less crowded second-tier cities and smaller towns. The 2020 shift to remote working has given South Africans another reason to consider semigration. If you can live and work anywhere, it makes sense to live somewhere with a better quality of life and less expensive lifestyle and/or housing.
An increasing number of environmentally conscious homeowners and buyers across all age groups are looking beyond the aesthetic of a potential new property in pursuit of sustainability of the planet. Energy and water efficiency and sustainable use of materials top the wish list but there’s a long-term strategy in place. Buyers are also looking sharply at rising utility costs and erratic municipal service delivery.
According to a recent Tech Cities report by Savills, tech lifestyle cities are seeing a growing emphasis on health and wellness, as they seek to attract top talent.
Top Tech Lifestyle Cities meet high standards of air quality, access to green space and have smaller geographic footprints while also providing the services and products that tech talent seeks today, such as fast broadband speeds and an affordable vegan burger, as explored in Savills Digital Nomad Essentials Index.