NZINGA QUNTA: June is Youth Month in South Africa and young property owners are said to be leaving the property market in droves. Mike Lehabe, who’s Lightstone Property’s head of banking and insurance, joins me now. Thanks so much for your time on the Moneyweb Market Update on SAfm. So 25% more homeowners left the market in 2021 compared to [those from] 2014 to 2020, according to your survey. Why?
MIKE LEHABE: Thank you for the opportunity and good evening to your listeners. I think it’s worth, just as a form of setting context, to maybe explain the statistics, as it were – that we generally track property registrations, so we have a good view of both people who are selling and people who are buying property, as it were.
You are right in saying that we saw a bit of a higher exodus than in previous years. We did see, for example, if you look at 2010, we’re looking at about 79 000-odd properties that were being sold by people who were not necessarily rebranding or re-buying property in the market. That number has now increased to about 128 000-odd. For us, putting together views like this, we not necessarily trying to start to answer why that is happening, but to sort of give a view that there is something that is happening in the market, and all stakeholders maybe need to take note of it to think about how we all respond, to make sure that we don’t necessarily perpetuate something that we do not necessarily want.
As you can imagine, young people in the property market represent long-term value, but also represent sort of aspirational aspects of people owning homes, as it were. So when we start seeing a trend like this develop, we have some concerns and we are saying let’s rather have more discussions like this around what could be the cause, and what could be ways in which we can mitigate some of these things.
There could be a number of factors, really. In the last two years we saw probably the highest [number of] property transactions in more than a decade. So it does mean when there is a buyer on the other end there is also a seller, so that it could just be just a natural impact of having a sort of much more liquid market.
We’ve also seen a huge impact from a Covid perspective, which has led people to think differently about property, [such as] around the space that they live in – is it sufficient to support working from home? Is it sufficient for the changing needs due to the pandemic?
There was also a potential response to interest rates being decreased, where we saw interest rates that were probably the lowest they’ve been in the last 50 years or so, and so that meant we had more people entering the market.
But equally in that period, we also saw some businesses struggle a bit, and that led to some record job losses as well. That could be one of the factors that leads to people exiting the property market. But it is also important to highlight that, while at this point we may classify the 128 000 as people who have left the market, some of them may re-enter the market as the economy sort of recovers and people get jobs and so forth. But there is, yes, a large chunk of that population that we may not see necessarily come back.
NZINGA QUNTA: Mike, let’s get into the kind of numbers we are seeing when it comes to homeowners leaving. Also, could you talk to me about the average price of the homes that they’re selling?
MIKE LEHABE: Yes. The average prices have moved significantly. If you look at from 2010 until about, say 2019, we’re looking at about R1.6 million and thereabouts as an average price of property sold by people who were not necessarily re-entering the market. What we saw now recently is that that number has ticked up to around R1.8 million, and that does indicate obviously that the time in which they’re selling, and the level of property prices is also responding to the increased demand [for] properties. They are selling at a slightly higher price than what has been the average price for the last few years.
NZINGA QUNTA: I know you said you also want to bring out these numbers and show the kind of trends so that stakeholders are aware of what’s taking place and, based on that, people can make decisions. So what do you think is next for the property sector if you’re looking at a trend like this?
MIKE LEHABE: I think the last two years have been years of learning for us. There are a lot of things that happened. I relate to the interest-rate piece, but there’ve also been changes from a financial services perspective. We saw up to 60% of the property transactions that were happening were bonded. We saw some creativity from the banks around how they assisted buyers to enter the market, part of it being that they were assisting them around their general transfer and registration costs. So with stuff like that things like interest rates tend to sort of prop up people’s ability to enter the market. So it’s things like that that we have to think about.
We also have to think about what is it that we can do to necessarily have conversations with people early, before they necessarily exit the market. And [we need to think] about other triggers that we could be building in our different models, or in our different relationships that we do have with our clients. I think it does mean that if we have closer relationships with our clients we will be aware of the necessary changes that may be impending, and we can respond accordingly.
NZINGA QUNTA: Mark Lehabe, Lightstone Property’s head of banking and insurance, thanks so much for your time and insight on the Moneyweb Market Update on SAfm tonight.