Despite the initial shock to the housing market from the severe lockdown and further uncertainties surrounding the pandemic, the market for residential property – across all price bands – has proven to be one of the country’s more resilient sectors. The aggressive interest rate cuts to near 50-year lows and resultant improved affordability, particularly for first-time buyers and renters, and the change in priorities as a result of the lockdown catalysed a wave of demand in the market which surprised on the upside.
While we cannot know what the long-term effects of the pandemic and associated lockdown will ultimately have on the property market, with the impact of the pandemic far from over, continued changes in the way we live and work can be expected to continue to evolve – with important consequences for the residential property market.
The most fundamental change has undoubtedly been the shift to universal remote working. As time passes and, in places, a growing percentage of the population is vaccinated, there is an increasing focus on trying to figure out how we will work in future. Many employers are looking to influence how and where their employees work while reassessing their office space requirements. With the business environment remaining uncertain, this process is likely to play out over the long term – with major structural consequences for the very fabric of our business hubs.
What we know at the very least is that demand for office space is likely to be reduced and that at least some of that space will be repurposed to residential accommodation. This means that there is likely to be an increase in new residential stock in some hubs. In the case of South Africa, a significant portion of housing demand comes from first-time buyers, as a significant proportion of the population are younger and young and not yet in the formal housing market. This suggests a possible proliferation of more affordable, mixed-use developments close to public transport and business hubs may well be a key growth sector in the future.
In South Africa, the semigration trend of homeowners to the so-called Zoom towns is well documented, with small, often coastal towns, and peripheral suburbs with amenities and healthy municipalities experiencing a net influx of new residents attracted by the appealing lifestyle and relative affordability of homes in these areas. However, in the US – which is seemingly approaching a level of herd immunity – some of those who had relocated to the country are starting to show the first signs of returning to the cities. It is possible that while some will find that they miss their networks of family and friends and the previous lifestyles, they may well opt to return home once they have learnt to live within the new parameters created by the pandemic. It is also possible that this may not occur to the same degree in South Africa as the transactional costs of buying and selling are relatively high.
Given that the pandemic may well remain with us for some time, it appears likely that we will adopt a more flexible approach to living. For property developers this would suggest a stronger focus on mixed use developments, which allow a property to be used in many different ways and provide a range of amenities and functions to residents and tenants in these uncertain times.
In addition to the pandemic, there is also a growing acceptance of the importance of climate change and the need to move to a net zero carbon environment. Given that South Africa has such a young population, the awareness and willingness to embrace a sustainable lifestyle, and the extent to which cost considerations make self-sufficiency and reduced dependency on government-supplied electricity and water, all suggest that the shift to sustainable, green building and lifestyles is likely to rapidly gather momentum.
While there is often a focus on different generations and their varying values and needs, it is also important to remember that there are still lifecycle similarities and that young adults or first-time buyers are likely to favour a small lock-up and go in a business hub, while a young family may be more likely to consider moving to a Zoom town. Homeowners who are downscaling could go the route of a well-located sectional title or a small freehold in an estate – such as the retirement component of an estate, or in a small town. These life stages will dictate different housing requirements regardless of the pandemic because if you can live and work anywhere, it makes sense to live somewhere that suits your particular needs, Covid-19 notwithstanding. That said, South Africa’s property market is currently underpinned by first-time buyers wanting security, convenience, affordability and buzz, suggesting that micro-apartments in business hubs will retain their appeal.
While it remains to be seen how the country’s economic recovery gains traction, we believe that solid fundamentals remain in place for ongoing investment in the residential property market.
