
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.