A year since the start of the Covid-19 lockdown of South Africa, the local property market has defied predictions of a plummet in prices – the price of homes soaring instead between 3% and 8%.
The market was quite sluggish in the first 3 months of 2020 followed by 9 weeks of an almost total market shut down.
Low economic forecasts before the pandemic had the property market forecasters predicting a drop in prices of around 2% in 2020 on the back of a slight drop in 2019.
But by the 2nd quarter of 2020 many economists were predicting a 10% drop in line with the economic forecasts for the country.
After all, a black swan event which led to the largest economic decline in decades would make it a safe bet to think that house prices might crash, similar to that of 2008. Instead quite the opposite happened.
Unlike commodity markets, where investors need to off-load quickly when there is a crisis or over supply, the personal asset market works differently.
These markets, in this case property, move much slower and are by and large financed by personal debt.
The first big relief was that all the banks offered a very welcome payment holiday on owners’ bonds.
This meant the mass panic to sell in order to service a mortgage was eliminated, or at least delayed in most instances, for about 6 months.
On top of this the reserve bank also cut rates by 300 points, again making life easier for sellers and making them think twice selling, avoiding an oversupplied market.
The benefits of cheaper borrowing for a buoyant property market are obvious.
We saw many renters become buyers, many 2nd and 3rd time buyers upgrading for the same amount of debt exposure and more investors and holiday home buyers coming out of the woodwork.
Last, but not least, is the change in people’s spending priorities.
This has largely been focused on their primary residence, either up-sizing, downsizing or relocating, all of which has resulted in increased buying activity.
This has been seen all over South Africa but the semi-gration benefits, due to now being able to work remotely, have been reflected very noticeably on the Garden Route and North Coast.
Trying to predict the status quo this time next year is very difficult.
The full effects and fall out of the pandemic may only be seen later this year, and the “pent up” demand that has been spoken about could finally be caught up by then.
Most predictions remain positive for property in 2021, with the range being around 1% – 6% especially locally and on the Garden Route.
A stable and sustainable growth of that kind would certainly please most.
