I have had a few clients ask me what I think the market is going to do in this post lockdown period, over the next three months and post Covid-19… Whenever that may be.
Should they buy? Should they wait? Should they sell
I wish I had a crystal ball. This exercise would have been very easy.
We don’t so we have to make educated guesses.
I want to break it down into Long term (2 years plus) and Short term (0-18 months)
Disclaimer:
Although I had economics in School and studied international trade for three years I am by no means a financial service provider or future predictor.
I have a huge interest in World politics and economics and follow quite variety of people and sources.
We have some really clued-up people in at our local Keller Williams offices in South Africa and we can track data from all our offices stretched out over five continents.
The first thing that we have to realise is that we are flying blindly.
Yes, the world has been through two recessions in recent years, but in modern times the world has not been shut down as it has currently since the Second World War.
So although we can look back at the previous two recessions, we cannot base our predictions on their outcomes.
So the next obvious questions are then:
This recession was started by the underlying Dotcom crash but was probably really triggered by what happened in NYC on 9/11. This was essentially an “event
As you can see , 2008 was brutal on the housing market.
We all know that US Housing market (Subprime mortgage crisis) as the big reason for the recession so it makes sense that this industry would take such a huge pounding.
What type of recession will we have?
V, U or L Shaped.
“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices), and some very cutting-edge search engine analysis by our Information Management team showed the current slowdown is playing out similarly thus far.”
“It’s worth looking back at history to place the potential impact path of Covid-19 empirically. In fact, V-shapes monopolize the empirical landscape of prior shocks, including epidemics such as SARS, the 1968 H3N2 (“Hong Kong”) flu, 1958 H2N2 (“Asian”) flu, and 1918 Spanish flu.”
Based in this we all hope for a V-shape recovery but all will depend on how fast the virus is brought under control, when consumers will have dependable income and also to actually have confidence to spend and get the economy going again.
Compared to the rest of the world property prices in South Africa is still far under-valued.
Compare what you can buy in Durbanville for R3m versus what you can buy in London for £150 000
Compared to other parts of Cape Town, the Northern Suburbs still provides great value.
This has been a huge shock for people all over the world. People will react in different ways.
Not only in the real estate sector but across all industries.
Most of us understand supply and demand and I believe this will have the biggest impact on pricing in the next 6 to 12 months.
Before March 2020 we were in what you would call a “Buyer’s Market” in South Africa.
Practically, this meant that in the Northern Suburbs of Cape Town there were a LOT more properties in the market than there were buyers.
Properties stayed on the market until the price was adjusted to where buyers felt that the properties were correctly priced and a transaction happened
Before lockdown this meant an average of four months and one day.
Property prices stayed too high and eventually the properties were taken off the market
We call it expired listings.
To understand and predict the immediate future we have to understand the concept of supply and demand and the impact that will have on pricing
As with all markets (products, industries and areas) there is a universal concept that when supply outnumbers demand prices go down.
When demand outnumbers supply then prices go up.
Time will tell how this pandemic affected South Africa’s property market, but personally I don’t think it is all doom and gloom.
Based on the current info available I think that although demand will decrease, supply might stay the same which hopefully will not create carnage in the market.
For sellers this is bad news as prices might be down.
For buyers this is great news. (Especially investors with cash on hand or access to funds)
But, if you are both (buyer and seller), this might not be a bad spot to be in (depending on you specific circumstances).
Yes, you potentially might get 10% less than in a normal market, BUT this means you might also save 10% on the property you are upgrading to.
The fact that the interest rate has dropped by 2% not only means more affordability for buyers, but it also means that you can buy a lot more house for your budget.
Every situation is unique and depending on YOUR industry and yourfinancial position.
Obviously do you research and make sure your work is “recession proof” before committing to a large debt payment.
Even in lockdown, Keller Williams (in South Africa and abroad) has continued to market, facilitate and conclude real-estate transactions.
We are waiting for the deeds office to open to process transactions already in our system.
We can’t wait for level 3 to be able to service our clients again but in the meantime keep these four things in mind.
Make sure your house is in the best possible shape.
Start with the “low hanging fruit” and only spend money on that which you know you will get a ROI on.
Understand the concept of Supply and demand.
Decide on your timeframe.
Price accordingly keeping in mind the other properties you “compete” with.
Have tech, Visual and digital marketing focused marketing plan that includes:
– Virtual reality tours,
– quality photos
– professional video.
Mae sure that the maximum amount or qualified buyers “sees” your house.
– Traditional Electronic platforms
– Agent network
– Social media
If we are lucky, the world may get this virus under control soon and get our people working again.
I think there are lots of opportunities for investors at the moment, but we have to make wise decisions, whether we are buying or selling.
If you have any property-related questions, contact me now.
Even if it is just to give your input or opinion on the market!
Riekert
+2782 556 7427
riekert.cloete@kwsa.co.za
