Downscaling, whether for financial reasons or due to life stage, is still why most people sell their homes and they will sell if ‘priced right’ as it is still very much a buyer’s market – but emigration and dual living are also trends to watch in 2019.
The first quarter of 2019 has just ended and according to FNB economist Siphamandla Mkhwanazi the latest FNB Estate Agents Survey picked up on a few trends in the South African property market. Chief among these were 1) that market activity appeared to have picked up a little (more sellers were also willing to drop their asking price to secure a deal); 2) that downscaling due to life stage remained the dominant reason behind property sales (emigration-motivated sales were also on the increase), and 3) that recovery of the property market is dependent on the country’s economy improving (which property experts expect will happen but it will take time).
Read more about the results from the survey here
This is what property experts had to say based on their experience of the property market during the first quarter of the year and they also shared what their expectations are going forward after the elections in May is concluded.
Mkhwanazi said said there has been a reduction in the average time that a home remained on the market from the end of last year (average 15 weeks and 3 days in 2019 Q1 compared to 17 weeks and 6 days in Q3 2018). Samuel Seeff, chairman of the Seeff Property Group, points out that this is still much longer than the market average of 12 weeks.
Mkhwanazi also said more sellers (95.3% in 2019 Q1 compared to 94.3% in Q4 2018) had to drop their selling price to secure a deal. The average price drop is around -9.4%.
Seeff said consumers have less money to spend on property while facing growing budget constraints due to rising costs as well as weak income growth. “This naturally translates to a somewhat muted property market which, while active below R1.5 million (R3 million in the upper income areas), continues to put pressure on sellers and asking prices. Although the market remains active, we are still trading at 20%-40% below the 2015-2017 highs,” Seeff said.
He explained that the focus is on asking prices, especially at the higher price levels where a discretionary market is in operation.
According to Pam Golding’s chief executive, Dr Andrew Golding, the property market had unquestionably managed to pick up in certain key upmarket areas such as the Atlantic Seaboard in Cape Town and Hyde Park in Johannesburg. Still in Gauteng, Pretoria and Centurion have also seen good sales with the North Coast of KwaZulu Natal also continuing to attract home buyers. These good sales figures are tied to properties being “priced right”.
“What we seem to be seeing at present is that the correction in prices that we saw last year is filtering through to properties spending less time on the market. Buyers are beginning to see value again (after the price correction) and are committing to purchasing again,” said Golding.
According to Lightstone Property data there was a 5.7% decrease in the number of bonds registered since the last quarter of 2018 and the number of transfers declined by 7.7% in this same period. Regional director and CEO of RE/MAX, Adrian Goslett, says a drop in activity over the first quarter is not unusual and in fact, show a 25% growth on the number of bonds registered in the first quarter of 2018. “This means that the banks’ lending appetite has increased, which is a positive for buyers,” he says.
Furthermore, interest rates and the credit rating have remained stable which encourages investor confidence Goslett says. He added that the high-end market seemed the least affected by the overall decrease in registered transactions.
Richard Gray, CEO of Harcourts, said they have also seen an increase in demand with more activity in areas that showed a decline in 2018, but they expect consumers to remain under pressure due to rising costs.
Top reasons for selling
The FNB survey listed downscaling because of life stage as still the top reason for selling a property in South Africa accounting for almost a quarter (23%) of all property sales where as downscaling due to financial pressure was estimated to account for 15.9% of all sales.
Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, said according to his statistics downscaling has increased but he would attribute it to economic factors. “The cost of living has soared in all respects and people are struggling generally and have opted for downscaling in order to meet their commitments. So, in short, it is not your empty-nesters specifically but a general trend,” says Geffen.
Gray agreed that downscaling due to life stage is a major factor in the real estate market.
Golding said the ‘downscaling’ trend is more prevalent at the upper end of the property market which would suggest an ongoing demand for high-end sectional title properties.
Mkhwanazi said their survey showed that emigration-driven sales (14.2%) were on the increase and was said to have doubled in the last two years being more prominent in the coastal areas and in upmarket segments.
In Cape Town Seeff agents in Pinelands and the Atlantic Seaboard report while they have had clients in the last year who are looking to sell to emigrate, downsizing, upscaling or relocating within the country are still more commonly the reason given for selling a home.
However, Geffen reckons the 14.2% attributed to emigration represents only the tip of the iceberg, namely those sellers who accepted a price below their expectations and moved on to other countries. These are generally people in their 40’s who have young children.
According to the latest Wealth Migration Report an estimated 3 000 wealthy South Africans (high net worth individuals with a net worth each exceeding $1 million) left the country over the last decade, roughly 300 per year. Most went to the UK, Australia and the USA with Switzerland and Portugal also listed as popular destinations.
Semigration, or relocating within the country, is another trend they continue to see among middle- and upper-income home buyers said Golding. Relocating within South Africa is listed as accounting for 7.8% of property sales in the FNB survey, the fourth highest group.
Geffen and Gray both saw communal living as a rising trend at the moment and this is also due to the high cost of living. It generally happens where adult siblings join in with parents in a communal living space to share the costs, but also between people that share the same values. In Cape Town’s upmarket northern suburbs Welgedacht and Durbanville Seeff agents report an increase in the requests for dual living properties, but apparently this trend isn’t picking up everywhere in the Mother City.
Expectations post elections for 2019
It is still a buyer’s market said Mkhwanazi with there being more properties in supply than there is a demand, but this situation appeared not to have worsened in the first three months of the year.
Property experts generally agree that the property market currently favours property investors and first-time home buyers. However, there is also uncertainty among investors due to ongoing political unrest and concern over the recovery of the country’s economy with the power utility Eskom still in dire straits.
It is expected that the market will only start to pick up once the dust has settled after the general election on 8 May.
There appears to be an improvement in the economy, but there are also many political and economic uncertainties ahead of the election in May said Golding. The general economic outlook will have to improve for the property market to show positive real growth he said, so they expect the current slow house price single digit growth to continue.
“Furthermore, it is hoped that a dampening of inflationary pressures may result in a hike in rates being delayed until late-2019 or even early-2020.
Seeff says their group remains of the view that the property market will remain fairly flat, trading sideways for the first half of the year, and current market and economic indicators continue to support that view. “There is a market for serious sellers, but you need to adjust to your local market trends as the group is seeing an increasing number of sellers having to drop their asking prices to conclude a deal,” he ends.
True. Adrian Louw, sales and rental manager for Seeff Century City says whether people decide to buy or sell, there will be a need for estate agents. What is important is for agents to gain experience, focus on networking and become entrenched in their area as buyers have a significant offering to choose from and agents need to close the deal for their motivated sellers, concludes Adrian Mauerberger, luxury sectional title agent, Seeff Atlantic Seaboard.