Pieter Janse van Rensburg MD Times Squared Marketing (Pty) Ltd
A year later, from level 5 hard lockdown to a more relaxed level one and we are still standing! There is no doubt, however, that we are headed into uncharted territory and most industries have been forced to rethink their business models and adapt to a rapidly changing economy.
The property sector will face one of the biggest shifts, with remote working having changed the concept of ‘the office’ irrevocably, and lockdowns having forced people to rethink the living-value of the space they call home.
In the rental sector, there is still a high level of uncertainty. The last time the rental market exhibited the same numbers was during the 2008 financial crisis, with vacancies and tenants in arrears being the main contributors. Many dependable tenants are waking up to the fact that in the current environment with the low-interest rate, many are paying in rent what they would be paying monthly on a bond, and are therefore opting to buy rather than rent.
The commercial sector is also feeling the punch, office spaces in particular, due to the work-from-home shift. It is expected that in future, more companies will move away from larger office spaces and encourage staff to work from home where possible. Smaller office spaces will be kept for core staff. There is an influx of smaller retail spaces in the commercial sector as more and more consumers are easing into online shopping and a physical retail shop is no longer essential. Economic pressures stemming from lockdown has also caused the closure of many small-medium enterprises’ doors, further leaving a number of commercial premises untenanted. This is a growing trend due to high uncertainty pertaining to the economy and is preventing many would-be entrepreneurs to start businesses that could potentially fill these vacant spaces.
From a home owner’s perspective, spending months on end confined to their homes, have caused many consumers to rethink their living space. There is a shift towards an increase in living standards in the home which includes better views and larger entertainment areas. Being home for the majority of the day highlights discomforts in terms of a lifestyle perspective and many consumers are making the conscious decision to improve this. There is also an expected growing demand for homes with a designated, comfortable office space that can accommodate more than one person.
House prices are rising more than expected, with data from FNB showing house price inflation for February increased to 4.2% year-on-year, which is up from 3.9% in January. According to FNB, the resilience in the property market is due to “ultra-low” interest rates. The numbers tell the same story, with applications and approvals for home loans increasing year-on-year since 2020’s Q3. FNB confirms that 2020 saw South Africa’s highest number of mortgage approvals in over a decade.
A non-Covid related trend, and one which is happening globally but is particularly relevant to South Africa, is urban densification. Some believe that the next 10 years will see the greatest social migration of all time, led by emerging economies like South Africa, which in turn will lead to the biggest ever construction surge.
The movement of people from rural areas to urban areas is constant but is expected to snowball in coming years, and according to The Centre for Development and Enterprise (CDE), 70% of South Africa will be urbanized by 2030. This means urban densification is a national imperative and sure to be high on the government’s to-do list. It is expected that in order to manage this influx effectively, local governments will be looking to collaborate with private investors which will yield plenty of opportunities for property developers.
Lockdown may have accelerated the technology surge through enforced social distancing and work-from-home requirements, but the current trends in technology and its effects on the property market, helped along significantly by the rollout of 5G, was always on the cards.
For consumers, user-friendly and intuitive digital platforms have become the norm, and to call it a trend, seems vastly inadequate. A recent Lightstone Survey of 500 estate agents proved this when it was revealed that the digitalization of their services, from networking to the viewing of properties, is a top priority for them. A particularly interesting piece of information is that these agents said that 14% of their buyers bought real estate without ever physically visiting the property. This number doubled the one recorded in pre-Covid times.
For many, the current market feels threateningly unstable, but that may simply be because things aren’t as they used to be. Change can be rocky, and being tipped out of one’s comfort zone can feel like a disaster, when in fact it is merely the start of something new.
Yes, things are drastically different, yes, things are alarmingly uncertain, but to plant new crops, one has to break apart and upend the earth. This time can either be an end or a new beginning, depending on your perspective.