South Africa's housing market, already battling headwinds, can expect further shocks in the coming months, analysts have warned.
According to the latest FNB Property Barometer released on Thursday, annual house price growth fell to 1.9% in April, down from 2.5% in March – the lowest it has been since December 2009.
There was already a buyer's market in SA before the coronavirus pandemic, due to existing economic pressures. Supply is exceeding demand, giving buyers more options and negotiating power.
Sale prices at the higher end of the market could drop by between 20% and 30%, believes Grant Smee, managing director of Only Realty and founder of property investor hub Epic South Africa. He attributes this to various factors, including affordability, demand, how many foreign buyers are available – and how long the lockdown lasts.
He expects property prices in the mid-range – R1.5 million to R3 million – to decrease by 15% - 20% in some areas, with prices in the affordable range experiencing a 5% - 10% decline.
"There might be some areas that will be less affected, but broadly speaking the economy, affordability and the amount of supply I expect in the market after lockdown, means we will be in an extended buyers' market for at least the next 18 to 24 months," he says.
While interest in the property market has been stimulated through interest rate cuts, affordability remains a key concern for buyers and sellers alike.
A lower interest rate gives struggling homeowners the opportunity to keep up with instalments on their home loan, leading to fewer homes being forced onto the market. This could then prevent a housing market crash where supply far outweighs demand and property values plummet, according to Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa.
Making the most of buying and selling
Despite lockdown, the local residential property sector has been implementing new measures to attempt to minimise disruption, says Smee. This follows an international trend, with with 58% of current buyers in the US market taking part in virtual house tours, according to the National Association of Realtors.
"Lockdown deals" include sales at prices ranging from R600 000 to R35 million in areas from Still Bay and Hermanus to Benoni, Hyde Park and Pretoria, says Berry Everitt, CEO of Chas Everitt.
Goslett advises buyers, including first-time buyers, to enter the market as soon as they can – if they can afford to do so – as interest rates are at a record low and house price growth is near stagnant.
He advisers sellers to be patient and realistic about their asking price, should they wish to close a sale after the lockdown period.
Dr Andrew Golding, chief executive of Pam Golding Properties, advisers sellers to compare their desired price to previous sales in the area, as well as to properties currently on sale in that area.
Samuel Seeff, chair of the Seeff Property Group, agrees.
"Provided your asking price is market related, any offer close to your asking price should be considered. You can always make a counteroffer if you sense that the buyer might come back with a slightly better offer...the longer you wait, the lower the price that you may need to settle for in the end," he suggests.
How to win even if you're staying put
While current conditions may present an opportunity for some to enter the housing market or to buy their "dream home" at a price they can finally afford, this isn't true for everyone.
Goslett cautions buyers not to rush into decisions they can't afford solely in order to enter the market before housing prices correct themselves.
Carl Coetzee, CEO of BetterBond, agrees that keeping accounts in good standing – and saving as much as possible for a deposit – is a key consideration.
It's uncertain how readily banks will grant 100% home loans, he warns, and prior bond approvals may be reassessed in cases where an applicant's circumstances have changed, for example where income has been reduced.
For existing homeowners who opt to stay put, Seeff recommends maintaining repayments on one's home at the same level as before interest cuts, if you can afford to do so. This will result in a shorter lending term and savings in the long run.