The curious case of SA's booming house sales

BUYER'S MARKET:

Estate agents have notched up record sales in recent weeks, in stark contrast to earlier expectations that SA's housing market was likely to hit rock-bottom this year. Two months ago industry experts feared that demand for residential property would all but dry up on the back of a coronavirus-induced recession, given that housing activity was already subdued before the pandemic hit SA's shores in March. In May, data analytics group Lightstone warned that average house prices could drop by as much as 14.5% by year-end. But latest indications are that the housing market is holding up better than expected. In fact, Re/Max Southern Africa, one of the country's largest real estate groups, sold houses worth a hefty R2.38bn in July alone. That's the highest monthly sales turnover ever recorded in the company's history and well ahead of the R1.9bn achieved in July 2019. Re/Max regional director and CEO Adrian Goslett says some of the group's offices have closed deals worth three times their usual monthly average in July. The group's most active suburbs include mostly upper-middle income areas such as Fourways and Morningside in Joburg, Faerie Glen and Garsfontein in Pretoria and Parklands and Parklands North in Cape Town. Other major real estate agencies, such as Pam Golding Properties, Seeff Property Group and Lew Geffen Sotheby's International Realty, have also reported brisk sales since lockdown restrictions were eased in June.

FOOT IN THE DOOR:

Pam Golding Properties CEO Andrew Golding confirms high demand for properties in the lower price bands up to R2m. Most ascribe the rebound to buyers cashing in on cheap borrowing costs. Late in July, the Reserve Bank cut interest rates for the fourth consecutive time this year, bringing the prime lending rate down three percentage points to 7%, which is the lowest level since June 1966. Mortgage originators have similarly seen a sharp recovery in home loan applications; both BetterBond and ooba report growth in volumes of at least 25% since early June (year on year). It appears that a large chunk of sales is going to first-time buyers and buy-to-let investors - predominantly in the price category of below R3m. As Lew Geffen Sotheby's International Realty CEO Yael Geffen puts it, "historically low lending rates have opened the real estate market to a huge number of first-time buyers who would not previously have been able to afford their own homes". Geffen says savvy investors are also taking advantage of the market's current value proposition. Pam Golding Properties CEO Andrew Golding confirms high demand for properties in the lower price bands up to R2m, while saying that several sales have also been concluded in the R2m-R5m range.

VALUE PROPOSITION:

Lew Geffen Sotheby's International Realty CEO Yael Geffen says historically low lending rates have opened the real estate market to a huge number of first-time buyers who would not previously have been able to afford their own homes Image: SUPPLIED He believes the market has bounced back due to a combination of record low interest rates, softer house prices and pent-up demand after housing sales ground to a virtual halt during the April-May hard lockdown period. Golding adds: "Buyers are no doubt also capitalising on the zero transfer duty payable on properties up to R1m." There appears to be renewed interest in the holiday home market, which has been in the doldrums in recent years. Seeff has sold two big-ticket beachfront properties at Zimbali Coastal Resort near Ballito on the KwaZulu-Natal north coast in recent weeks - for R20m and R24.5m respectively. Pan Golding Properties reports several sales in the Eastern Cape's surfing hotspot of Jeffreys Bay, including a beachfront vacant plot that fetched R3m. In the nearby upmarket coastal enclave of St Francis Bay, a number of houses in the R1.5m-R4m range changed hands in recent weeks. Pam Golding Properties Richard Arderne says some have even been concluded sight unseen by a Dutch and a US investor, among others.

BIG-TICKET PROPERTIES:

Zimbali Coastal Resort. Seeff recently sold two big-ticket beachfront properties at the resort, near Ballito, as interest in the holiday home market, which has been in the doldrums for years, also appears to be picking up. The question arises whether the rebound in housing activity will be short-lived or is the start of a sustainable recovery. FNB senior economist Siphamandla Mkhwanazi is hesitant to draw conclusions until more data become available. The full effect of the pandemic on unemployment levels and labour markets also still needs to play out, he says. "Analysis is further clouded by the sporadic closures of various deeds offices, resulting in occasional lack of adequate and timely data. "This makes it unusually difficult to distil the most recent trends." However, Mkhwanazi concedes that house prices appear to be holding up better than expected and that FNB's earlier forecast of a price decline of 5%-6% for 2020 may well be averted. Latest FNB data shows that average house price growth slowed to 1.9% in April - the lowest level since December 2009 and down from about 3.5% for 2019 as a whole. Mkhwanazi says: "A shallower price decline of about 2.5% for 2020 and a relatively swifter rebound in 2021 now seems more likely."