There has been a huge amount of interest and increased activity from first time buyers as a result of the extremely low interest rates and no transfer duties payable on properties up to 1 million. A lot of these first time buyers were formerly renting and have found more appealing and affordable solutions.
Dr. Andrew Golding says that millennial buyers have the ability to get into a suburb that they may have been able to afford a year ago.
According to the Deeds Office and FNB, 43% of residential sales are from younger buyers (below 35 years of age) as compared to 38% in 2019.
There has been an overall increase in demand for property purchases in the residential property market which is now creating stock shortages in high-demand areas.
It is a well known fact that homeownership is one of the best ways to create wealth and plays a critical role in the economic transformation in South africa.
According to the company Lightstone, most of the first time buyers now look for properties in the R700000 – R1.5 Million price band. Most first time buyers and repeat buyers want a three bedroom, two bathroom unit.
Estate based properties and sectional title properties are very appealing to female buyers as they usually offer better security.
According to the company Ooba, the approval rate for first time buyers has averaged at 80.1% from January to October 2020. In 2016, the approval rate for first-time buyers averaged at around 68.5% which illustrates an improvement since then.
There is also an increase in the number of loan applications for 100% bonds where the approval rate of these bonds sit at 80.4% during the time period from January to October 2020.
The trends that are obvious as a result of 2020:
- Working from home:
Working from home has always been segmented into three categories. These would be the self-employed professional, the cottage industry entrepreneur and the young start-up. For most people, getting to work meant that you would have to commute to work everyday.
The national lockdown has disrupted the working world and has supplied a new approach to how we work. Many people have now been presented with promising options for working remotely. Underutilised rooms in homes have been transformed into working hubs. Sectional title units with extra rooms are likely to be an attractive choice.
Co-living
Co-living is becoming a global trend where more people move to co-living spaces. Co-living brings together people who live in small personal spaces and share communal areas such as bathrooms and kitchens.
The appeal of co-living spaces is so that people can live in areas that they would not be able to afford otherwise. The sacrifice would be that their private space is smaller and communal space is shared with others. Co-living spaces are usually more flexible which is attractive in uncertain times. Another attractive aspect of co-living spaces is that it removes loneliness as you will not be living alone.
Gated lifestyle estates rise in prominence
Most people are spending the majority of their time in their home either working or studying, their homes have become more of a sanctuary and quarantine bubbles. Security gives people the ability to access safe open spaces with restricted access which is being taken into account with the potential future quarantine requirements.
Many people are moving to second tier cities and smaller towns
According to FNB, there is a trend of homeowners moving to less crowded second-tier cities and smaller towns as a result of life in lockdown.
An example of this is Port Elizabeth. Port Elizabeth is a second-tier hub with a convenient yet safe lifestyle in an affordable location. These types of locations offer urban convenience and quality of life coupled with a lower price tag.
With the shift of remote working that was implemented for most people in 2020, you can live and work anywhere. It only makes sense to live somewhere with a better quality of life without an expensive price tag.
Sustainability is becoming more of a focus
There are an increase in the number of environmentally conscious home owners across all of the age groups. Water and energy efficiency and making use of more sustainable materials are becoming more of a focus for homeowners. Factors such as service delivery and expensive utility costs make it more ideal to become off-grid and independent.
Looking ahead to 2021
The banks have come to the party by keeping interest rates low which have helped people keep their homes. This ensures that the market is not flooded with extra property stock. There has however, been an increase in the number of sales as a result of financial pressure.
The economic impact of the national lockdown will most likely result in more business closures and job losses.
Interest rates are expected to remain at their low levels until late 2021, this remains a positive aspect for the property market. It is yet to be seen if our government will increase the tax rate in the 2021/2022 National Budget as it attempts to contain debt levels.
There is huge strength in demand from young buyers and there are fewer homes that have come onto the market due to financial pressure which explains why prices of properties have held up better than expected.
It is not clear how the work from home situation will be resolved in the long run, it appears that many people will be freed from being completely office bound. This means that moving into certain towns that would have been too far from work and schools are now more feasible for homeowners.