South Africa’s property market mirrored the turbulence and resilience of the country’s political economy in 2021.
While the pandemic continued to weigh heavily on the economy, the introduction of vaccinations and the milder Omicron third wave lifted the mood, helping to activate economic activity while low interest rates have boosted residential property in certain areas and value bands.
However, the unrest in KwaZulu-Natal and Gauteng in July 2021 caused significant damage to infrastructure and property, rattling confidence.
Lightstone Property has, says Head of Digital, Hayley Ivins-Downes, picked out a few key developments which reflect changing consumer behaviour and its impact on residential, retail, and commercial property:
Retail property: wealthier shoppers go online, mall visits drop, and dwell times change
Visits to shopping centres have stabilised to approximately 80% of where they were in January 2020, before Covid-19 struck.
Not only has the pandemic reduced mall visits, but it has changed the amount of time shoppers spend at malls. Short and long visits have been replaced by ‘mid-length’ visits, probably because shoppers have cut back on ‘impulse stops’ as well as restaurant, cinema, and other leisure-activity based visits which are likely to last longer than an hour. The dwell times mirror the severity of lockdown restrictions, with shoppers spending less time at malls during periods of greater restriction and more time when restrictions ease.
Visitors from wealthier areas have cut their visits to malls (see graph below), suggesting an increase in online shopping and greater stockpiling of groceries.
A study carried out by Deloitte reported that despite the decrease in shoppers felt by the malls, e-commerce saw the reverse, with South Africa’s online retail penetration now sitting at well over 22 million consumers making purchases online in 2020.
Commercial property: still lagging pre-Covid-19 levels
There was a slight increase in commercial property transactions, although the sector has not yet recovered to pre-Covid-19 levels recorded in 2019. The value of transactions is down on 2020 though, with commercial property at R35 billion (2020: R36 billion), retail the same as 2020 at R15 billion, industrial at R12 billion (2020: R13 billion) and office R9 billion from R12 billion the year before.
Residential property: mid-value to luxury recovers, affordable struggles with transfer values reaching a six-year high
Transfer volumes increased in 2021 compared to 2020, reversing five years of consecutive decline. Although affordable housing transfers fell for the sixth consecutive year, mid-value, high value and luxury all moved forward positively from the lockdown lows of 2020.
Despite the drop in numbers, the value of transfers has reached a six-year high at nearly R279 billion, well up on R225 billion last year and the previous best of R244 billion in 2018. Each of the value bands also recorded their best numbers for the last six years.
There were marginally fewer first-time buyers in 2021 (106 417 from 106 617 in 2020) but significantly it was first-time buyers in the affordable value band who were most affected by the pandemic and tough economic conditions as purchases dropped from 37 353 in 2020 to just 31 780 this year – well short of the 46 995 in pre-pandemic 2019.
However, there were more first-time buyers in the mid, high, and luxury value bands.
Despite the reduced number of first-time buyers, they spent more than ever on their houses – R75.6 billion compared to R66 billion in 2020.