low interest rate & semigration trend

Low-Interest Rate & Semigration Trend Drive Growth in Residential Property Sales

A low-interest rate coupled with the semigration trend are two of the contributing factors driving the growth in the residential market.

Low-interest rate 

Marcél du Toit, CEO of residential property platform Leadhome, says that the thriving market is driven by a number of factors: “The market is strong. People are buying a lot of property, so we’re seeing a lot of volume. The property market is always affected by supply vs. demand, and right now we have lots of clients able to invest into property as a result of the low-interest rate. What this means is that properties are currently selling for less than their anticipated price as sellers scramble to secure sales. It really is a buyers’ market right now.”

Read: First-time homebuyers continue to dominate the residential property market

One of the key indicators that Leadhome looks at to assess the attractiveness of selling a property at any given time is the ratio of buyer enquiries they receive compared to the number of properties they’re marketing on behalf of sellers (measured over a rolling 7-day period). Simply: the higher the ratio, the more buyer interest there is.

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Leadhome statistics show that, when ‘hard’ lockdown ended on 1 June 2020, buyer interest skyrocketed. The average was 90% buyer enquiries to marketed properties, compared to 62% in 2019. This means that every property on Leadhome’s books received 0.9 buyer enquiries every seven days, compared to the average of 0.6 buyer enquiries in 2019.

Semigration Trend & Shift in homeowners’ priorities 

Du Toit says that this massive increase in buyer interest was spurred by a shift in homeowners’ priorities. “Almost overnight, people needed more space to work and school their children from home; bigger family areas, kitchens and gardens became sought after; and people no longer had to plan their days around commuting. Many South Africans ‘semigrated’ from city centres to outlying areas to find homes that could accommodate these needs. Not only do the suburbs, and even rural towns, have this kind of space, they also offer more bang for your buck, which, combined with the falling interest rate, powered massive growth within a certain price range,” says du Toit.

Read: Suburban migration will drive the hybrid way of working in SA

 

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Conversely, the same time period saw many South Africans downscaling due to financial constraints caused by lockdown. The upshot, says du Toit, is that the residential property market burgeoned: “It’s safe to say that the property market is buoyant, even in an economic environment that continues to be volatile.”

Read: Will property investments post Covid-19 still be a safe option?

The property market is seasonal, and buyer interest dropped over the holiday period at the end of 2020 but had recovered by mid-January, when Leadhome saw 1.39 enquiries every seven days per property on their books (an increase of 54% since July 2020). In March, this is levelling off to one enquiry per property every 7 days (an increase of 11% since July 2020).

Du Toit says that while they do expect to see a slight drop in buyer interest over the next two months, due to Easter and the school holidays, they predict a rapid recovery in June and July. “If you’re thinking of selling,” says du Toit, “May will be a great time to put your property on the market. However, while we believe that buyer interest will be high, it will be really important to price your property correctly if you want to sell it quickly.”

In 2019, 74% of offers received by Leadhome sellers were below what the property was first listed at. This increased to 77% in 2020. Of the sellers who received offers, in 2019, 16% of them needed to reduce their asking price before they received an offer, and this increased significantly to 36% in 2020.

“We expect to see a strong buyers’ market continue well into 2021, especially in areas like Sandton, which, last year saw 33% of sellers, mainly in the suburbs of Bryanston, Paulshof, Sunninghill and Douglasdale, needing to reduce their asking price before receiving any offers. They also accepted offers of around 95% of their original asking price,” ends du Toit.