Research Residential

Working-from-home drives semigration to SA’s coastal and semi-rural areas

While working-from-home and safer living are driving sales on South Africa’s coast and in semi-rural areas, predicting where residential property will be in the next twelve months is not easy.

Interest rates and economic growth are two fundamental drivers of residential property sales, while a third – socio-political developments – have also become increasingly important.

All these drivers have been overshadowed by the pandemic over the past twenty months with government responding by lowering interest rates to combat the negative effects of Covid-19 and its lockdowns.

However, according to Lightstone Property, there are two segments showing promise: coastal and semi-rural properties. As the hybrid and full-time work-from-home culture continues to entice buyers, so is the shift in buying behaviour.

While uncertainty surrounds many areas of the property market, investors may be able to take refuge in this promising segment” notes Hayley Ivins-Downes, Head of Digital at Lightstone Property.

Where are we now?

The 2021 market has benefitted from pent-up demand from the initial lockdown phases but, will this momentum be carried into the new year?

The low interest rate has been particularly positive for the property market, with nominal price growth up to around 4% in February 2021 compared to February 2020.

Growth is coming from specific segments of the market. While overall volumes have declined, the total purchase price paid has increased (see graph below).

This increased price paid is noticeable in regions such as the Western Cape, where there is an upsurge of buyers seeking larger, more work-from-home friendly properties. This is exemplified in the following graphs:

Interestingly, while the graph above tells us that Johannesburg accounts for more sales than Cape Town, the value of sales in Cape Town is higher”, notes Ivins-Downes.

Where will the market go?

Will the economy get the kick-start it needs, and what will happen to interest rates? And, what about socio-political conditions?

If Covid-19 comes under control over the next twelve months and South Africa sees the end of lockdown restrictions, the economy should gather some momentum on its own.

Some economists see the repo rate moving upwards in 2022 / 2023 and this will negatively impact house prices in the medium term, particularly if economic growth is not there and if socio-political conditions do not ease.

Bigger homes to work from as the semigration trend gathers pace for the work-from-home lifestyle will continue to influence property sales, especially in remote and coastal areas where buyers are looking for larger, better equipped homes that serve dual purposes.

Among the country’s major municipalities, Lightstone’s data shows that coastal municipalities perform better than inland municipalities. This can be partly attributed to an ongoing trend towards semigration or buying second homes, with a growing number of people from Gauteng looking to move to the coast.

The municipal elections may also amplify or diminish this trend, depending on outcomes in key municipalities.

While entry-level buying and first-time buying appear to be cooling, a second surge is evident with the rate at which high-value purchases and second-time buying have increased.

The trend away from freehold and towards safer, more cost-efficient, gated communities is continuing and Lightstone expects it will continue to do so.

It will be interesting to see how the market reacts to these trends and how the property investment market will perform,” concludes Ivins-Downes.