The year 2020 has undoubtedly been challenging for most individuals and businesses. Many have found themselves in tough financial situations, as household income and business revenue was slashed significantly due to the harsh effects of the coronavirus on the local and global economy. The real estate industry isn’t immune to recessions, in order to understand the role the property sector plays in the South African economy, a study was conducted on how COVID-19 has impacted real estate agents and their business operations.
The study, dubbed the Property Industry Sentiment Survey, took place in October over a 2 week period. About 2162 responses were received, which helped with deciphering the general perspective of real estate agents in South Africa. The study was targeted towards people who are active in the real estate industry, despite being open to the general public.
The results of the survey are as follows:
● Of the 2162 participants, 47% were located in Gauteng, 24% in the Western Cape, 16% in KwaZulu-Natal, with the rest hailing from other provinces in South Africa.
● 56% (1206) of the respondents stated that they are real estate agents, and 23% (505) stated that they are intern agents.
● 12% of the respondents (259) classified their occupation as a principal, with 4%, 3% and 2% classifying themselves as managers, franchise owners and office administrators respectively.
What aspect of property do most respondents specialise in?
● 62% of respondents said that they specialise in purely sales.
● 32% of respondents said that they specialise in both sales and rentals.
● The remaining 6% said that they only specialise in rentals.
The high number of estate agents who focus mainly on sales can be attributed to the allure of earning more commission as an agent, and although earning commission from rentals can be beneficial during times of slow growth in the property industry, only 6% specialised in this particular area.
The impact of COVID-19 on the business operations of the property industry
● 50% of buyers still prefer to view property in person.
● 48% of buyers prefer to view the property digitally and then in person.
● 2% of buyers prefer to view property on virtual viewing platforms.
Although we live in a digital era, most people still prefer to view property in person prior to making a decision. This can be attributed to the fact that people want to experience and feel a space with their five senses before fully committing to it, and the lack of data accessibility in South Africa makes people reluctant to fully adopt a digital way of viewing.
The financial impact of COVID-19
● 42% of respondents said that COVID-19 presented new opportunities for them.
● 39% of said that they were forced to adapt by making changes to their business.
● 12% said COVID-19 had no impact on their business dealings.
● 7% said that the impact of COVID-19 resulted in them considering downsizing.
Considering the harsh effects of the coronavirus, 42% of respondents stating that they were presented with new opportunities is quite high. One would have expected the opposite, where agents instead felt like they lost opportunities. The mounting pressure could’ve forced respondents to think outside of the box in order to find viable solutions to problems presented by the coronavirus.
How was agent commission affected during lockdown?
● 46% of respondents say that their commission was reduced significantly.
● 34% say commission was reduced but recovered quickly.
● 19% said commission was reduced slightly.
Respondents were also asked questions concerning how long they think properties remain on the market prior to being sold, and whether sellers are open to adjusting their selling prices to reflect the current buyer’s market. The sentiment for the latter question saw 50% of respondents stating that sellers are open to reducing their prices, 30% saying that they aren’t willing and 20% saying sellers would rather lease their property than drop their prices.
Lastly, 53% of respondents answered that the value presented to customers is still relevant, with 32% stating that slight changes are required in order to keep up with the ever-evolving industry. In effect, this equates to 85% of estate agents who still believe that they are integral to the success and growth of the property sector.
Takeaways from the Property Industry Sentiment Survey are:
• The real estate industry is constantly evolving and all players involved have to continuously evolve too.
• Agents have to adapt to whatever circumstances are thrown their way, as in the case of COVID-19.
• Sellers and landlords must be cognisant of the current state of the market in order to price property realistically and fairly.
• South African tenants and buyers also need to be more open to the use of technology, particularly virtual tours, when searching for a home. Although technology remains an integral aspect of the property sector, real estate agents are still very central to its success as nothing can replace the ‘human touch.’
In summation, different stakeholders in the industry have to be willing to adapt to provide value to customers whose expectations are always increasing.
Read the full report here.