What the Property Market Could Look Like in the Coming Months
Category Just Imagine Properties Team
Reports from the International Monetary Fund as well as a number of other major financial institutions paint a bleak picture of the South African economy, not only historically, but for the foreseeable future, with "anemic" being the word used in most of these reports to describe the contraction of the GDP seen in recent years, and especially in the wake of the COVID-19 pandemic. The economic and financial impact of the pandemic have been marked by widespread retrenchments, job losses and salary cuts. In March, Moody's Investors Services cut the country's credit rating below investment grade, also known by the rather depressing term "junk status", a move that has largely been the result of the recessionary effects brought about by the nationwide lockdown that has been in place since the beginning of this year and its profound effects on businesses and employees, many of whom found themselves unable to work. Economists predict a U-shaped recovery from the recession, which means that the economy may remain depressed and sluggish for a period of 12-24 months before bouncing back.
However, the outlook is somewhat rosier for property buyers as well as those who already own property with bonds linked to the prime lending rate, which is the lowest in 50 years, and many banks and financial institutions offering relief in the form of payment holidays for those who have been financially affected by the lockdown.
So, why is the South African property market seeing a resurgence despite the poor condition of Africa's second largest economy?
For one thing, there is currently a wide gap between the supply and demand of property, with the number of buyers outweighing the number of sellers, which is driving down property prices. In addition, with many South Africans now working from home as part of the efforts to curb the spread of the novel coronavirus, a large percentage of the country's population is now on the hunt for more comfortable work-from-home environments, which is contributing to the uptick in the property market.
According to Just Imagine principal Theo Erasmus, the sudden changes in lifestyle and work-home dynamics have been major factors in keeping the property market buoyant in these highly uncertain times.
"This is the new normal," says Erasmus. "People are looking for spaces that allow them to work while also experiencing the full benefits of spending more time at home. It could be that they need a house that's more suitable for this type of dynamic, or simply looking for something more spacious so that they can balance the responsibilities of both work and family.
Perhaps the biggest benefit to potential buyers, however, is the four successive interest rate cuts this year that has made buying a property the most affordable that it's been in decades. Banks are now also approving 100% home loans without demanding a deposit, which is a historically unprecedented move in the world of property acquisition in South Africa.
"These are truly historical times," says Erasmus. "The world at large has needed to adapt to a completely new way of living and there was no way of anticipating the impact that this current scenario will have, although we could confidently predict an adverse effect on the economy, a prediction that has come to pass. However, property buyers have a plethora of reasons to be optimistic, and we believe this is the best time to buy".
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Author: Charl Mijnhardt
