A long-overdue burst of good news is required in this blog. Not only because it’s required but because the news is good….if that makes sense?
I receive a regular email “From the desk of Dr Andrew Golding”. Apart from his natural, positive style, he relays excellent information for on- and offshore properties. But what really struck me was the increasing interest in luxury properties.
“As South Africa continues gradually emerging from the national lockdown, the luxury residential property market is showing promising signs of increasing activity”, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
“Among most recent sales by Pam Golding Properties is a home in Clifton on the Cape’s Atlantic Seaboard purchased ‘sight unseen’ by an American for R30 million, and a penthouse in the V&A Marina which achieved a sales price of R41 million, also acquired by a US buyer. Both buyers are familiar with the highly desirable lifestyle offering on the Atlantic Seaboard, and a comparable seaside lifestyle in most European and North American states would cost multiples of the cost here in Cape Town. “More recently, we have begun to see interest from Chinese, UAE and US buyers.”
“However”, says Dr Golding, “the luxury residential property market, which spans from approximately R5 million up to R100 million and beyond in rare instances, remains predominantly a local market, with foreign buyers comprising only around 1% of total sales in any given time period.”
Hot spots for high net worth buyers
Dr Golding says there are generally speaking five key areas which are the most sought after in South Africa:
- Johannesburg, primarily the Sandton area.
- Cape Town, notably the Atlantic Seaboard but also Bishopscourt and Constantia.
- Durban and Umhlanga – notably Umhlanga, La Lucia and Ballito – including Zimbali Coastal Estate.
- Paarl, Franschhoek and Stellenbosch in the Cape Winelands.
- Menlyn Maine in Tshwane metro in Gauteng, which offers secure, lock-up and go living and a bespoke concierge apartment lifestyle.
Adds Dr Golding: “There is a marked trend towards gated communities – in fact, residential estate living has been attracting interest for many years. New World Wealth estimates that as many as 40% of South Africa’s high net worth individuals live on residential estates. especially those with International Schools in the estate or in the near vicinity.”
And then another insight which covers “the rest of us”…
The level of activity in the housing market in the months since real estate agencies were allowed to reopen (1 June 2020 at Level 3) surprised market analysts. For example, FNB recently noted that not only has the volume of new mortgage applications rebounded beyond pre-lockdown levels across the price spectrum, the level of buyer interest seen on property portals has also surpassed levels seen in early-2020 when Covid-19 was but a distant threat.
The resilience of the local market certainly runs counter to initial expectations that residential market activity, already subdued by years of sluggish economic growth, would slump further. However, it would seem that there are a number of factors currently driving significant sales volumes in South Africa’s residential property market. These include, among others, the impact of Covid-19 and the ensuing lockdown – including the fact that Deeds Offices were closed for several months, which has created a considerable pent-up demand, and the historically low-interest rates, to name but two.
Interest rates at historic lows
One of the obvious, but significant changes caused as a result of the pandemic has been the Reserve Bank’s bold decision to slash interest rates by 300bps this year to date to an almost 50-year low of 7%. For many homeowners, this unprecedented low, coupled with the price correction in the local residential market in recent years to more realistic levels, has resulted in a clear message that this may well represent a ‘once in a lifetime’ opportunity for buyers.
And first-time homebuyers are taking advantage of the cheaper finance to acquire more expensive properties, with such buyers accounting for almost 53% of home loans during the second quarter, according to ooba. As we have noted previously, South Africa’s young population, with nearly two-thirds of citizens currently below the average age of a first-time buyer (34 years), provides the market with a solid underpinning.
Notably in the Western Cape and other sought-after locations in South Africa, well-priced properties are now attracting strong buyer interest. In the residential property market, we are currently seeing that the main price bands experiencing the most interest and activity are those up to R2.5 million and R3 million, followed by the middle market price band between R3 million and R8 million, and upwards.
Brisk sales in June, July and August
During the months of June, July and August, we experienced a significant activity uptick in terms of successfully concluded sales, which, while partly attributable to the pent-up demand as a result of the lockdown, is also indicative of a tendency among some buyers to reassess their residential ‘lifestyle’ requirements as a result of the lockdown, as well as an aforementioned strong appetite among first-time buyers to enter the property market.
The latter is partly driven by former renters who prefer to put down roots and gain the security of tenure by purchasing their own homes – rather than pay rent while capitalising on the low-interest rates as well as the zero transfer duty payable on properties selling below R1 million. Many millennials who used to remain mobile, maintaining the flexibility to travel globally, seem to be looking at getting apartments and ‘settling down’ for now.
Various trends evident in the marketplace include relocation to smaller and/or coastal towns and downsizing due to financial pressures or upsizing – to satisfy the need for work-from-home space and more outdoor space. In this regard, we are seeing a shift back to freestanding homes with garden cottages and an increasing demand for homes in secure lifestyle estates.
Furthermore, depending on how the pandemic and lockdown impacts, some families are choosing to live together to save costs, namely multigenerational living, others are relocating provincially – perhaps to a more relaxed lifestyle in a second-tier city, while some are emigrating. That said, we are not seeing a specific increase in sellers due to emigration – we have also noted that some sellers who were preparing to emigrate either cannot get to their destinations or in some cases the jobs they were going to, have been done away with.
Finally, there are still those who are selling and relocating for the usual reasons, namely lifestyle changes, downscaling as adult children have left home, retiring and so on. While questions remain regarding the sustainability of the current high levels of activity in the housing market, particularly as the full economic cost in terms of revenue lost and job losses are still far from clear, the reassessment that many South Africans have made regarding their needs in terms of their homes, and indeed, their perceptions of home, is currently seeing a positive wave of change wash through the residential property market.
Don’t you just love it?! And all of us are experiencing it across the country. What a welcome relief from the long, dry commercial drought of covid. I hear the caution about this unexpected activity which seems to baulk at every other trend in the country [much like the Stock Market in the USA]. But enjoy it while it lasts, is all I can say.
John Loos, Property Sector Strategist, FNB writes in his Property Insights – The potential impact of remote working and the changing office property market could be far-reaching:
“The potential impact of remote working and the changing office property market could be far-reaching. But in the near term, there will be more questions than answers. While many companies may have embraced remote work because they were forced to, the true extent of this enthusiasm for remote work from management teams and employees alike will only become clearer once the COVID-19 Crisis has passed and office buildings are 100% open.
Nevertheless, surveys point towards many companies planning to downscale on office space. Some concerns have been flagged, with some pointing to human relationships between fellow employees perhaps “going a step backwards” due to a lack of “same location” interaction, but even many people harbouring some of those concerns often agree that, while there may be a need for some time at the office, the amount of time could be significantly reduced.
Nevertheless, while remote working will not be without flaw, COVID-19 lockdowns have probably given the scale of working from home a massive boost for another reason over and above forcing people into getting used to it. Many CFO’s will thus likely be eyeing out cost-cutting opportunities and reducing the amount of costly office space owned or leased by their companies. Besides the cost reduction aspect, 72% of the CEOs saw benefit from remote working in terms of widening their talent pool.”
If there is going to be a lasting change after covid, I think this may be it. Virtuality has become the order of the day and many people I speak to are loving the convenience especially now the kids are back at school.
Compare my experience with yours:
- WhatsApp has become my friend. Connected and free.
- I have run many small and large Zoom and Teams meetings. They have worked well despite my initial reservations.
- Seeing people is better but domestic wi-fi does not support video. Switched off, virtual meetings work better.
- Sharing documents is a cool idea but you need an easier method of reading full-screen and still knowing what’s going on in the meeting.
- Questions and “hand-ups” are not easy when you’re scrolling your full-size pdf documents.
Etiquette is required. What I found is:
- Once the meeting is started, listen carefully. Without body language, voice tonation is all you have to message emotions.
- Greetings must be real but keep personal matters to a minimum. People don’t want to share their weekends with five other people.
- Keep it short – a good rule for all meetings anyway.
- Get to know peoples’ voices. That way you remain personal and in touch.
- Watch out for humour. Much is conveyed by your face and the faces of others. A good joke can go flat if you don’t hear laughter or at least see smiles; it can leave you without the affirmation of personal contact.
- Create a rule for Yes’s and No’s right upfront. Many questions are met with silence though people may be nodding in agreement. Silence is
- Consent is as good a rule as any and the minutes can record that.
- Always make sure your camera is switched off and/or your mic is muted. Very embarrassing possibilities go through my mind.
- Don’t stress about interruptions. Sometimes the dog’s bark or my mentally challenged daughter comes to say hello. People have gotten used to your home life so just chill.
- In the end, say goodbyes and then get off the call. Like any phone, “Leave” the meeting.
- AND, a final word – I do not miss flying to Joburg, driving in traffic the ultimate time-waster, and hanging around for meetings. Online meetings are exceptionally effective.
Breaking away for a moment, other industries have recovered well as well. In Hermanus, the town is hectic, the hardware shops, restaurants, community services, parks and recreation, [vaping 😊] and retailers are kicking up a storm. Each has their own tales of lockdown, but now they’re busy again.
Just to that point, the way to avoid Ireland’s L5 lockdown is to…wait for it…here it comes again…Wash your Hands, Wear a Mask and Socially Distant Yourself From Others. Stop comparing yourself with others, “those okes there” and be your own best friend. Comparing yourself with the worst examples is in poor taste. Be good and stay healthy.
Covid will be with us for a long time and so will HLJ. We salute you as you return to full-steam and appreciate your business and the interaction we can have. To you and those you love, we’re proud to be associated with you and to have survived another chapter together.
There is Good News. Find it, read it and absorb it into your Self.