The world is changing fast and to keep up you need local knowledge with global context.
The percentage of homeowners selling their properties because of financial stress reached 23% by the third quarter of 2020.
According to the FNB Property Barometer November 2020, owners with properties below R750,000 accounted for 30% of sellers. Those offloading properties priced between R2,6 million – R3,6 million came in second, recording a high of 27%.
Financial pressure forcing many to sell
Siphamandla Mkhwanazi, FNB senior economist says sales as a result of financial stress increased between Q1 and Q3. In Q1 2020, those downscaling due to financial pressure accounted for 18%.
He says most of the properties were priced below R750, 000. Of those sellers, 62% indicated that they would be buying cheaper properties with 38% saying they would be renting.
“We expect this to come down a bit as economic activity picks up. However, it is also possible that pressure builds up in higher priced brackets,” says Mkhwanazi.
He explains that if the labour market pressure spreads to white-collar occupations, this could affect the high end of the market. So far, this group has been relatively insulated from financial pressures.
|Reasons for selling||Q3 2020||<R750,000||R750,000-R1,6m||R1,6m-R2,6m||R2,6m-R3,6m||>R3,6m|
|Downscaling due to financial stress||23%||30%||23%||18%||27%||18%|
|Downscaling with life stage||22%||13%||22%||24%||27%||28%|
|Change in family structure||10%||7%||12%||11%||11%||13%|
|Moving to be closer to work or amenities||6%||12%||7%||6%||2%||2%|
Estate agents say the main reasons for selling are downscaling for lifestyle changes and in some instances financial stress. Others relocate for a better lifestyle or upgrade to bigger properties says Dr Andrew Golding, Pam Golding Property group CE.
He says post-hard lockdown, there’s been an increase in relocation for business purposes, retirement or to be close to family.
According to Susan Watts, broker/owner of RE/MAX Living Cape Town, there is huge pressure on affordability in all market segments.
“Some people became richer and others became poorer, hence the movement within the property market. While many are selling due to financial stress, others can now get their foot in the door,” says Watts.
Some homeowners are also selling their investment properties along with a decline in rental property demand. This is according to Louis Kruger, Kruger Attorneys and Conveyancers Incorporated director.
Low interest rates and falling house prices are fuelling home buying at the moment. Many tenants are turning into homeowners, resulting in buy-to-let investments reaching double digit vacancy rates and flat rentals.
He says divorce is another reason for selling. “Whether the divorce is caused by financial stress, working from home, depression resulting from the pandemic is not clear.”
Kruger says many sell to upgrade to bigger properties to allow for a conducive work-from-home environment or home office.
Emigration sales down
According to FNB, emigration sales reached 10% from nearly 18% during the same period in 2019. Nearly 70% of property owners aged between 35-44 years were selling in order to emigrate.
It’s unclear whether the moderation in emigration is temporary because of Covid-19 or it signifies a shift in the market. “However, it’s unlikely that we will see pre-pandemic levels. This is purely because prospects of finding employment are now lower compared to the pre-pandemic period, says Mkhwanazi.
Globally, unemployment figures increased as a result of the pandemic. “If the trend does pick up again, it will exert further downward pressure on property prices, primarily in the upper end.”
LeadHome data shows that post-lockdown, selling to emigrate was below 10% of total selling. This indicates that lockdown may changed individual retirement and emigration plans. In addition, movement between countries is more difficult currently, according to the agency.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.