Sell fast – There’s Another Real Estate Slowdown On The Way

If you’re a home seller, you should absolutely not withdraw your

property from the market now in the hopes of selling it at a higher

price next year.

 

That’s the unequivocal message from Berry Everitt, CEO of the

Chas Everitt International property group, who says the surge in

buying that has been evident since June is likely to taper off

towards the end of the year as more households feel the real effects

of the Covid-19 economic damage, even if the Reserve Bank

lowers interest rates again this year as expected.

 

“As we predicted, pent-up demand from the hard lockdown of April

and May plus the huge reduction of home-loan interest rates this

year have caused real estate demand and bond applications to

rocket in the past three months. First-time buyers have been

particularly active and as a group we had record sales months in

July and August.

 

“There has also been a lot of talk recently about the market starting

to favour sellers more than buyers as stock is absorbed and some

homes even start to attract multiple offers. And this is now leading

many sellers to believe that significant home price increases are on

the way and that they should hang onto their properties until next

year.”

 

However, he says, they should actually do the opposite. “It is

important to note that many of the personal and business relief

measures which were introduced in April will be coming to an end

soon, and that unemployment is expected to rise further as SA’s

economy experiences the lagged effects of the colossal blow it

suffered from the hard lockdown in the second quarter.* This will

cause home buying activity to stabilise again shortly and, we

believe, to remain only ‘slow and steady’ for at least the next 12 to

18 months.”

The Covid-19 relief measures which have helped consumers

weather the past few months under various levels of lockdown

include home-loan instalment and rental deferments, levy

reductions, UIF payments, UIF wage replacements and the special

Sassa relief of distress grants. “But all of these will be out of the

system by the end of October and that is when we are going to see

many marginal households thrown into the financial distress they

may have avoided until now.”

 

Both home loan and rental default levels can then be expected to

rise, says Everitt, “and what that means is that distressed owners,

the banks and distressed landlords will be bringing more stock on to

the market again, at exactly the same time that the number of

financially-able buyers are declining.

 

“Prices are hardly likely to increase in such a scenario, and could in

fact even decrease, which will create some superb buying

opportunities for those who have the means to do so. But it is

frankly also going to make it increasingly difficult for home sellers to

attain their asking prices, which is why we are urging current home

sellers to stay in the market now – and to work with qualified and

experienced agents to ensure that their properties are sold as soon

as possible.

 

“They will then be free to downscale should they need to cut costs,

to rent if needs be, to eliminate some debt or even to upgrade at an

advantageous price.”

 

*The latest figures from StatsSA show that South Africa’s GDP

dropped by 16,4% between the first quarter of this year and the

second, which is when the hard lockdown occurred. On an

annualized basis, the drop was a whopping 51%. Despite the

expected rebound in the third and fourth quarters, the Reserve

Bank still expects the economy to contract by more than 7% this

year. Meanwhile, the unemployment rate is already over 30%,

which equate to some 10m people out of work.