NOMPU SIZIBA: The South African residential property market is said to have experienced unprecedented activity levels since the country emerged from hard lockdown in June 2020. Once-renters are said to have gone into the market as buyers, for example, while other people took advantage of lower interest rates to get what they wanted, with lifestyle-change requirements also said to have featured in people’s decisions to buy property.
Well, to get their observations on the property market in the last year or so I’m joined on the line by Adrian Goslett, the regional director and CEO at RE/MAX Southern Africa. Thanks very much Adrian, for joining us. It really looks like the activity in the property market has continued to be quite robust since property transactions were allowed to resume again, following the hard lockdown in the middle of 2020.
You note substantial increases in property sales registered on a quarter-on-quarter and year-on-year basis in your latest property report. Please share the details with us.
ADRIAN GOSLETT: Hi, Nompu. Firstly, thanks for having me and, wow, what a difference a year makes! If we had had this interview a year ago I wouldn’t have had much to talk about, would I, sitting in full lockdown – no sales, no registrations, no income? But yes, since June last year, effectively straight out of lockdown through to the end of this first quarter, the housing market has just exploded – not necessarily in house-price growth, but certainly in unit turnover.
Talking from a volume perspective or a bigger part of the rand-value perspective, our numbers are 46% up on the first quarter of last year. And when you consider that, the first quarter of last year was mostly, if I can say, a normal year pre-Covid.
NOMPU SIZIBA: So long after the property market could transact again. I know you often mentioned to us when we spoke to you last year, that there was a massive backlog at the Deeds Office, delaying transactions. Do you think, once the backlog was processed, that has something to do with the massive increases that you’re seeing in terms of the year-on-year numbers?
ADRIAN GOSLETT: I wouldn’t say year on year. I would have said in those first few months – June, July, August, maybe even September – those registrations would have started to eke through and leak through and maybe even have gone through into October. But I wouldn’t put it down to simply the lag in registrations. I would have said, and I will say, one of the biggest contributing factors has been the reduction in interest rates. If you take the consistent reductions by the Reserve Bank, it’s been an effective 30% reduction. At the moment the prime lending rate is at 7%; that came from around 10%. People say it’s 3%, but in effect it’s 30%.
So a home owner or a home purchaser now has 30% more in their pockets to put towards a bond. And that’s why one of the hugest contributing factors has been the first-time entrance of buyers into the market with that.
NOMPU SIZIBA: So when it comes to property-price movement – you touched on it earlier – you’ve observed positive increases. But is that growth still below-average inflation or are you beginning to see a different picture?
ADRIAN GOSLETT: If you take the medium price across South Africa, which is just over R1.2 million, in the end you’re looking at single-digit numbers, so it’s around the 6 to 7% increase for growth. So it’s still reasonable growth. I guess it’s because of the stock on the market and because of the number of sales happening. Prices are still slightly pegged back. But I believe property is a long-term investment, a long-term appreciation asset. I’m going to sound like a typical agent here, but honestly the last 12 months probably has been the best time to climb in; and you’ve probably still got a window left of low interest rates. In fact, I would say quite a lengthy window of low interest rates to climb in if you are looking at moving out of rental space and into a more ownership space.
NOMPU SIZIBA: Interest rates, of course, are quite a lure, just one reason for buying a property. But what’s your outlook for the balance of 2021 in terms of appetite for buying property?
ADRIAN GOSLETT: Well, at the moment it seems unrelenting. As soon as fair-market-value property goes on the market at the moment, we’re getting multiple offers on those. In fact, some of our agents are almost complaining – which I wish they wouldn’t – but complaining about a lack of stock as they call it, a lack of properties available.
So I think that’s still going to continue for a while, and I think the reason the appetite is going to remain is because of those low interest rates. It’s one of the major contributing factors to why the rental market is a little bit upside down at the moment. Those that own not just commercial – that is a crazy situation on its own – but even those that own residential properties that are renting them out have either had to reduce those rentals, or certainly have not been able to put any increases on the top of those for the last couple of years. And the major contributing factor as well is, if I can purchase a home for 30% less than previously through the house or home loan, I’d rather own an asset than rent.
NOMPU SIZIBA: Adrian, we’re going to leave it there. Thank you so much for your time. Adrian Goslett is a regional director and CEO of RE/MAX Southern Africa.