Historically, property is an asset class that has managed to beat fluctuating market forces, being a far more resilient investment type than most – and less volatile than the stock market. In this time of uncertainty, hopes remain high that regardless of the COVID-19 pandemic, things won’t be any different.
So how will the property sector withstand this once-in-a century pandemic, said to mark the greatest global shift since World War 2, with most parts of the world not yet over the infection peak?
The effect has yet to be fully quantified, but is extremely important given that the sector is a huge contributor to the economy, contributing significantly to gross domestic product, with mortgage registrations totalling over R147 billion last year alone. In addition, the property market is heavily impacted by employment levels and consumer confidence, both of which have taken a severe knock thanks to the lockdown.
“The impact of the virus is unlikely to derail the property industry, but it could take as long as three years to fully bounce back,” warns Clifford Oosthuizen, MD of Westbrook, a multi-generational development in the Eastern Cape. “We are only on the start line of recovery and it will take time before the full extent of the trail of destruction the pandemic is leaving in most sectors becomes clear.”
An industry that employs approximately 100 000 people – both directly and indirectly – has been overcoming the challenges associated with the lockdown by introducing virtual viewings of pre-recorded footage of properties. Now, with the shift to Level 3, it will slowly begin to return to “not so normal”, including a continued ban on show houses. Interestingly, the real estate transaction process also requires a relatively low level of human interaction compared to other sectors that have been permitted to operate at this level.
News of the market being allowed to operate earlier than the expected Level 2 means that more than 46 000 property practitioners, who have not earned an income since lockdown came into effect, are now able to return to work. Agents were previously restricted to working remotely – adding listings, taking mandates, signing electronic offer-to-purchase documents, and facilitating bond applications.
“It is great news that we are finally able to open the door, not just for the sector but the country as a whole. But we must adhere to the strict protocols and safety precautions laid out by the government for our colleagues, clients and estate agents,” says Oosthuizen.
In this new business unusual reality of Level 3, property developers in South Africa’s fifth largest city will further embrace that flexibility which has become the new watchword as Covid-19 cheats them of their traditional markets, and forces them to rethink their sales strategies.
Port Elizabeth has long been popular with investors from as far afield as Australia and Dubai, but the status quo means they won’t be moving continents any time soon.
In this whole new marketplace, developers are looking much closer to home for their buyers, pivoting their focus to offer the kind of non-negotiable safeguards people will insist on in these unprecedented times.
“As developers, we have had to readjust and redesign our strategy to address this new challenge. But because our show units are empty and are sanitised daily and after each visit, they are available to view by appointment with an agent,” Oosthuizen explains. “Our Covid-19 workplace plan is in place, with each person affiliated to Westbrook being aware of its contents and accepting that it is imperative that protocols are strictly followed to ensure the safety of all.”
“The fourth interest rate cut of 2020 – bringing rates to 50-year lows – means even further savings to existing property owners as well as for those who have been renting for a long time and who are now looking to become homeowners,” he points out. “Our banks are offering 100% loans to potential bond holders and that should certainly entice investors.”
Property, Oosthuizen believes, is an asset class with supreme resilience and the unique ability to bounce back with vigour when conditions improve. The latest rate cut will aid the economic recovery of the national economy as the country begins to emerge from full lockdown. And he suggests now is the time for investors to capitalise on the prevailing buyer’s market conditions.