LEVEL 3 A QUICK OVERVIEW OF THE RESIDENTIAL MARKET FOR BUYERS & SELLERS AND LANDLORDS AND TENANTS
Although there is much anticipation for many industries around the move to level 3 on 1 June, we have no clarity around the property and real estate industry at the time of writing and await the regulations to be published. We do however have a strong sense that the real estate industry will not be back to regular business soon and that online tools will play a more dominant role in the long term.
One of the biggest questions we are facing now is how will agents be valuing properties both for sale and for letting? Can sellers expect the values of their properties prior to lockdown to hold after lockdown? Will we be seeing more bargain hunters taking advantage of distressed sellers?
A recent survey in the property rental market showed that this sector of the market was under pressure before lockdown and that as we approach level 3, one in five of surveyed residential tenants can no longer pay their rent either in part or at all. The general view across the sector is that there will be more rental properties on the market post-lockdown as sellers may elect to let while they wait for the market to improve and more AirBnB and holiday rental properties flood the market. It is interesting to note that individual landlords have been more accommodating to distressed tenants than corporate landlords and there is a view that the future will see residential letting based more on personal relationships and less as pure transaction. Additionally, value-adds such as free Wi-Fi will become more commonplace.
The impact of Covid-19 and lockdown in the residential sales sector is likely to impact volume more than price in the view of FNB property economist Siphimandla Mkhwanazi taking into account the patterns of the 2008 economic crash and more recent data from both the Deeds Registry and mortgage loan applications. The worst-case scenario sees a decline in house price by 5% and transaction volume by 45%. The luxury end of the market will likely be harder hit due to a pre-existing excess supply and depressed sentiment. In contrast, the affordable market is expected to be more resilient due to a combination of buying down, emerging bargain hunters and pent-up demand from first-time buyers taking advantage of a distressed market. The surge of web traffic on property websites together with a steady stream of online enquiries indicate this to be the direction of things to come.
Our advice to sellers is work with your agent to produce video walk-throughs, be aware of comparable properties to yours on the market and be resilient. Remember that your agent is working to assist you through these challenging times.