Property positives in midst of pandemic

Surprisingly it’s not all doom and gloom in the real estate market

The coronavirus pandemic and lockdown measures have burdened economies around the world, including in SA.

But, while real estate activity has also taken a knock, there is surprisingly some light at the end of the tunnel in this sector.

“As challenging as it has been to adjust to the notion of a ‘new normal’, there are some positives,” Port Elizabeth property expert Jaco Rademeyer, of JRE, said.

After the transition from level 4 to 3 on June 1, when agents were permitted to reopen, Rademeyer noted promising signs of market activity in the Bay.

“A slowdown in market activity was expected, but significantly this has not entirely been the case and signs of recovery are already being seen,” he said.

“Indications are that property prices could drop by about 5% — even 20-30% in the higher segment.

“But importantly, we are now seeing the best buyers’ market in the last 10 years — especially for properties under R2m in the Bay.

“People are overcoming their cabin fever and taking advantage of lower interest rates.”

The Reserve Bank in May dropped the repo rate from 4.25% to 3.75%, bringing the prime lending rate to 7.25% — the lowest since 1973.

“This is highly favourable for first-time buyers and investors, as the cost of renting vs buying is now in favour of buying,” Rademeyer said.

This was especially true for properties under R1m, for which no transfer duties were payable.

However, the upper end of the market had been under pressure pre-lockdown and this was still the case.

When the lockdown began there were fears of an oversupply of property, but some agents could not keep up with demand for stock, Rademeyer said.

Rhys Dyer, CEO of SA mortgage originator ooba homeloans, said other pluses included some sellers now being open to lower offers.

“There are likely to be attractive deals because of sellers who have either been holding on for some time to sell or are now forced to sell due to financial circumstances,” Dyer said.

Another positive was evident in bond approvals for first-time buyers.

“Ooba home loan application volumes in June were up more than 50% on June 2019, and more than 30% up on February 2020 volumes, before the lockdown was introduced,” Dyer said.

“In July, application volumes have accelerated further, up 60% on July 2019 volumes.

“First-time buyers represented almost 60% of all applicants nationally and, while bank approval rates are down on what they were at the beginning of 2020, we are still seeing approval rates above 75%, which is incredible.

“We are also seeing many tenants taking the plunge to buy their first property, which is exciting,” Dyer said.

Rademeyer said it was difficult to say when the market would stabilise.

“The economy was in the doldrums before the lockdown, and a slump towards the end of 2020 and into 2021 is not unrealistic.”

Dyer said: “Post-lockdown, our expectation is for a reduced appetite from banks, as they get a better understanding of the new risk environment they are operating in.”

- Herald Reporter