Just Property



The Opportunity In Adversity

The Opportunity In Adversity

01 September 2020

Is now the right time to purchase your first property? Paul Stevens, CEO of Just Property, weighs in on the opportunities available in the current climate of low interest rates and recession. Then he and Andrew Walker, CEO of the SA Property Investors Network (SAPIN) give their top tips for first-time buyers.

Paul Stevens, CEO of
Just Property, sees opportunity in the current climate to purchase property at discounted rates. “In May 2020 Lightstone predicted an 8.8% drop in property prices if South Africa’s GDP falls to -6%,” he says, but warns: “The current GDP forecast is bleaker than that as South Africa’s situation has worsened since Finance Minister Tito Mboweni announced in his emergency budget speech in June that the South African economy is now expected to contract by 7.2% in 2020. If GDP has a negative GDP growth of 10%, Lightstone predicts house price index will fall to -14.5% by the end of the year.”

Stevens notes that there are variances across the price brackets, however. “One needs to dig a little deeper to see what’s happening in your area and price range”. Lightstone’s Residential Property Indices, published in July 2020, indicate that “despite stable growth in the mid and low value segment, house price in the high and luxury segment continues to decrease”. 

“We are not yet seeing a drop in prices for the sector up to R1.5 million,” Stevens points out. “This market is still being fueled by high demand – Lightstone’s data analysts report house price inflation of 9.4% in the low value market (<R250k) and 5% in the mid-value market (R250k-700k) as at March 2020. The high value market (R700k-R1.5m) is showing only 1.8% inflation and the luxury market (>R1.5m) is falling back at -0.8% inflation.”

Stevens finds it interesting that the opportunities right now are not typically in investment properties but should appeal to buyers looking for homes to buy now in the higher price bracketsWith regard to opportunities in the holiday-/ second-home and sectional title markets, Stevens is cautious. Until the Deeds Offices become fully operational and backlogs are cleared, one the data that analysts currently extract from Deeds Office registrations may not accurately reflect real-time market activity. A trusted property professional who is also a local area specialist will have the best insight to offer. 

Stevens says that available data with regard to property in vacation and retirement towns is showing variances up and down on 2019 median prices.

In terms of property sales, data from Lightstone’s Town Reports shows a not-surprising decline:

  • 122 346 freehold sales in 2019 vs 35 645 in 2020 so far

  • 68 480 sectional scheme sales in 2019 vs 20 504 in 2020 so far

  • A 4% decline in average, year on year prices changes in sectional title properties and a 1% decline in freehold

  • Properties in the < R400 000 bracket are dominating the transfers stats (20 118 freeholds & 1 848 sectional schemes in the past 3 months vs. the next closest bracket of R800k - R1.5m, which saw 11 861 freehold and 7 012 sectional scheme transfers in the past 3 months)

“Savvy buyers will look beyond just the purchase price and see the value that can be unpacked in a property,” Stevens says. “For example, adding a garage or en-suite bathroom to a property will instantly improve its appeal to future buyers and the opportunity to make money on resale can be maximised if the renovations (and associated budget) is carefully managed.”

Properties that can be repurposed also present an opportunity, says Stevens, noting that a residential house could be rezoned for business rights, and a large house could be subdivided into multiple dwellings.

“There are risks associated with every investment and it is important to remember that buying and selling property costs money and takes time. If liquidity is important to you, then buying bricks and mortar is probably not right for you.” The property market is sometimes influenced by factors that may not be immediately apparent, he explains. 

“Take time to investigate local government’s spatial plans, investment/ development activity in the neighbourhood you’re considering, and the sentiment of the residents and/or business owners.” 

Stevens concludes with heartfelt advice: “Interest rates will almost certainly rise and, with them, your repayments if you finance the purchase. Do not over-extend yourself. Manage your cash flow carefully.” 

For more information on Just Property please visit www.just.property or call (087) 550 2258.

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