While many sectors of the economy are struggling to stay afloat, the real estate industry is experiencing an unexpected uptake in activity. There is a false belief that this is because property can be purchased at bargain prices now. The truth is that the increased activity has safeguarded against house price depreciation across most sectors of the market.
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, explains that in the different price segments, there are different things happening. “In the lower price segments, you’re seeing a lot of transactions and a lot of movement and not much to the way of price reduction. Sellers are not taking a knock in this segment – in fact, in a lot of cases there are multiple offers, so prices have been driven the other way,” he explains.
This is largely owing to the record low-interest rates that are incentivising first-time buyers to enter the market. “Our partners at BetterBond have stated that well over 50% of all home loan applications have come from first-time buyers since the pandemic started.”
On the other hand, the higher price brackets (from around R4 million and above) are the only price bracket that, according to Goslett, is seeing fairly substantial price reductions, from as much as 10% to even 20% off the initial asking price. “There are still offers on these homes and we are selling in those brackets, but these homes are taking a lot longer to sell, and sellers are having to take a knock in price. While I don’t think one could ever call buying a R4 million home a ‘bargain’, I do think that if there were an opportunity to purchase the bigger space – the home with the garden and the view etcetera – now might be the time to do that.”
Many landlords will also have to be realistic about annual rent increases, as the rental market is being hit hard by the move away from rentals and into homeownership. “There might also be ‘bargains’ for tenants these days, as many landlords are struggling to find qualified tenants who would prefer to rent instead of buy.”
Goslett reminds buyers that real estate is a cycle – it comes in waves. So, as much as there is a dip in some segments of the market now, there is going to be an upside later. “As long as you view real estate as a medium to long-term investment, you face a very low risk of making a loss and stand to gain substantial returns,” Goslett concludes.