UPBEAT ABOUT PROPERTY IN 2021
Category Residential Property News
Financial institutions weigh in on the property market buoyancy, and the increasingly positive sentiment of South Africans.
"Property is one of the few bright lights at the end of the current tunnel," says Myles Wakefield, CEO of Wakefields Real Estate. He echoes the view of Nicky Weimar, Nedbank's Chief Economist, who said recently: "We (Nedbank) are quite upbeat about the prospect for residential property in 2021. We know SA's economy took an enormous hit in 2020, but a recovery of sorts started in the third quarter."
An all-time low interest rate has clearly contributed to the buoyancy of the market, but importantly, an increase in positive buyer sentiment has played a significant role. Property is an emotive issue, and buyers and sellers are affected by a number of factors. In 2015, Absa created their Absa Homeowner Sentiment Index (HSI), in order to ascertain and analyse consumer confidence levels regarding the SA property market. The H S I reflects the percentage of respondents they survey, who are confident about the South African property market.
The good news is that in the fourth quarter (Q4) of 2020, the overall sentiment score of 80 percent is 4 percent higher than that seen in Q3. The main positive factors driving this are that property always increases in value, and property is, and always has been, a secure asset. This is the third consecutive quarter of sentiment improvement, ending Q4 at the highest percentage since the introduction of the HSI. In Kwazulu-Natal, Q4 was up an encouraging 6 percent (to 77 percent) over Q3.
"Clearly," says Wakefield, "looking at the healthy sales figures in our branches throughout KZN, buyer confidence is there." Absa's research showed that 78 percent of respondents consider it an appropriate time to buy property, considering the current market. This, too, is the highest buying sentiment since the HSI launched."
Selling sentiment increased, albeit to a lesser extent. Interestingly, non-first time homeowners were the only segment which didn't show increased sentiment - they had the biggest increase in sentiment towards renovating and altering property (+12 percent) - the motivating factors here are that renovation increases the value of the property, and brings better returns when selling.
What about the future of the interest rate? Weimar believes "The interest rate cutting spree is probably over," but it's still good news: "We expect interest rates to remain unchanged in 2021." The ABSA HSI concurs: "We still expect interest rates to remain at current levels, and begin a slow incline in 2022. " The HSI believes "Interest rates remaining low will be key in allowing the market to continue with what could be a new level of balance between buyers and sellers, where sellers have been increasingly satisfied with the price level of properties, and buyers have been able to access low cost funding to afford the purchases."
Wakefield says the low interest rate has had another effect on the property market: "Renters have been turned into buyers. If your monthly repayment is similar, you will choose to buy over renting." The HSI research confirms this: "All respondent groups had an increase in sentiment towards buying (as opposed to renting), with 78 percent of those from KwaZulu-Natal indicating they would rather buy."
A number of other factors are emerging from this period, in particular an increased interest in freestanding properties. "Being locked down in a freestanding home has, in many cases, had distinct advantage of size and space," says Wakefield. "For those who've worked from home, perhaps had elderly parents locked down with them, had children home-schooling...space has been the most sought-after currency. A spacious garden, too, has provided the dual benefit of space and nature."
Gated estate living will always be in demand. It ticks lifestyle and lock-up-and-go boxes for a number of market segments, and feeds into the global trend towards more condensed living spaces, with shared community amenities, security and caretaking. Gated estates are increasingly focussing on lifestyle, and ensuring that large sections are given over to trails and nature or wellbeing activities. These have great appeal for those who are weary of the big city stresses - even from other provinces - and are choosing to commute or put down roots in KZN's sensational upmarket coastal and inland estates.
Weimar also noted, "A more financially conservative consumer is expected to emerge from lockdown. Household income bounced back in Q3 2020, while spending still contracted, albeit at a slower pace. On balance, household income should start to gain upward traction in Q2 2021. Households will probably remain relatively wary of taking more debt." For a number of industries and small to medium businesses, home offices have been proven over the past year or so, to be a swift and effective way of reducing overheads.
Like everything post-Covid, this new world has put everything under a microscope. We've all had to examine where and how we live, work, play, invest and more. "Essentially, working from home, many don't even need to be near their place of work - they can live that coastal or country dream, and they're doing that," says Wakefield.
For the property world, ABSA Homeowner Sentiment Index summed up, "The low interest rate cycle has continued to play a key role in improving sentiment towards buying property, while property's ability to protect wealth in an uncertain environment and increase in value in the long term, have played an important role in improving sentiment."
Author: Anne Schauffer
