The dynamic South African real estate industry is poised for significant transformation.
Real Estate: 2020 and beyond
Influenced by a multitude of factors and operating in regular cycles, the real estate industry has always been one of the most dynamic, but in recent years the changes have become progressively dramatic with the next decade poised for even more significant transformation.
“Two decades ago, the way that top agents best serviced their clients was by being experts in their local markets,” says Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty.
“But these days a thorough understanding of your market is no longer enough; it’s also essential to be au fait with fast changing current and emergent global trends in order to retain the edge in an increasingly competitive market.”
She believes that the following are the key global trends of which property professionals need to keep abreast:
Urban expansion and the growth of second tier cities
The growth of existing cities is likely to be most prevalent in emerging economies, namely Asia (currently the most fast-paced region), Africa, the Middle East, and Latin America.
In developed economies, we will see significant growth of second tier cities as more and more people are forced to look for better value as a result of continually rising prices in first tier cities.
This is already becoming an established trend in the US where major companies are moving metros. For instance, Toyota has relocated to Dallas from Southern California and Apple is opening a billion-dollar campus in Austin.
In South Africa we are seeing the same thing happening in fast-expanding hubs like Midrand which is now home to a growing number of blue-chip headquarters including Deloitte’s and PwC, both of which have moved into the prestigious Waterfall precinct.
Changes in government policies and economic growth
It’s not only in South Africa that changing governmental policy and economic growth are key influencers, but their local import has been especially significant in recent years with a number of contentious land-related policy change proposals and a dramatic economic downturn.
In other countries like the US the UK there have been notable changes to tax laws relating to property.
Although we have little control over political and economic policy decisions, a thorough understanding of them will allow us to plan better and make deals which offer more than one exit strategy to safeguard ourselves and clients.
With life expectancy today higher than it has ever been, it’s predicted that by 2050 the global percentage of people aged over 60 will exceed that of those under 15 for the first time.
They are also more vibrant and active at this age than the generations before them and therefore have very different property requirements for their golden years which will have a notable impact on the industry, especially in developed economies.
Most looking to extend their independent lifestyles well into retirement and when they do give up the family home they tend to prefer to move to multi-generational communities, preferably with amenities and they will also require more nursing homes so healthcare will become more significant.
Globally, there is also a growing middle class and by the end of next year, it is estimated that the world’s population of middle-class consumers will have increased by one billion.
The millennial market share
Millennial home-buying is expected to peak next year, after which this generation will represent the largest share of the market for the next decade.
Not only will their first home aspirations push up single-family home prices in many markets, their unique lifestyle needs will continue to shape all aspects of the industry.
The lines between living, working, and playing are already blurring, which is clearly evidenced by the growing prevalence of ‘hipsturbia’, mixed-use suburban nodes near major metros.
Co-living, especially in and near the most expensive metros, is on the increase. This is most prevalent among millennials and, at the other end of the spectrum, where the ageing population is growing and accommodation and healthcare costs are rising.
This is also becoming more common in the workplace, with a report published by WeWork in October last year revealing that in London co-working is fast becoming an established trend with 17% of offices now on a flexible basis.
For a number of years now, smart home technology has been regarded as the ‘next biggest thing’ but it’s now becoming increasingly common in both renovations and new builds and many homes are already run by Alexa or Siri.
The new watchword during the next decade is likely to be "accessible homes" and real estate developers and investors alike will be forced to consider the growing smart home robotics sector which includes features and appliances like vacuum cleaners and mobile assistant robots.
This will require spaces to be more open plan with fewer stairs and floor finishes which are conducive to wheels.
In the industry itself, technology will continue to transform the way in which we do business as highlighted by recent KPMG research which revealed that awareness of the impact of technology on the real estate sector has increased.
The number of PropTech solutions has also grown considerably in the past few years, resulting in the emergence of a true PropTech jungle.
Green is still the new green
Sustainability is becoming ever more challenging and this is unlikely to change considering the projection that by 2050, the world will need 50% more energy, 40% more water, and 35% more food to sustain the growing population.
It is therefore imperative that the design of all new properties is based on ‘green’ or eco-friendly principles, including renewable energy technologies and waste reduction.
Geffen concludes: “When you consider the fact that real estate is already subject to an expansive number of extraneous influences like interest rates, housing prices and other economic trends, having to factor in a growing number of emergent trends can seem daunting.
“But, as the great philosopher, Socrates, said: “The secret of change is to focus all of your energy, not on fighting the old, but on building the new.”