The biggest obstacle for South Africa's residential property market in 2021 will be a predicted increase in the country's already very high unemployment rate in the wake of the Covid-19 pandemic, according to Berry Everitt, CEO of the Chas Everitt International property group.

He expects the number of distressed sellers to increase this year, bringing more inventory to the market, along with landlords who have been struggling for months with non-paying tenants and have now decided to offload some of their rental properties.

"Especially worrying is the unusually high number of the middle- to upper-income consumers who are usually better insulated against economic shocks, but are currently struggling to make ends meet as a result of pandemic-related retrenchments and company closures," says Everitt.

"The banks are of course aware of this and already tightening up on their home loan credit criteria in response. So even though we expect demand to remain strong, especially at the lower end of the market, we also foresee that bond approval rates will decline overall, and that demand will translate into fewer actual sales this year."

While SA's average home price ended 2020 only mildly down compared to 2019, Everitt says supply and demand overall are expected to remain very much in balance this year, making it unlikely for any significant increase in home prices.

"The decline in the number of SA homeowners who are planning to emigrate is a positive for the market - and especially for the smaller towns and coastal areas that are seeing a surge of executive semigration as the remote-working trend gains ground, and a corresponding decline in housing inventory," says Everitt.

The demand for homes priced at less than R2-million is expected to remain very lively in 2021 as long as interest rates remain at current levels, according to Gerhard Kotzé, MD of the RealNet estate agency group.

This demand will be supported by large numbers of first-time buyers as well as repeat buyers downscaling from more expensive properties, in his view.

"However, we may see the actual number of transactions in this bracket start to slow down as the banks begin to lend more cautiously in the face of growing concerns about employment stability. The possibility of large-scale retrenchments this year in big private sector companies and the public sector is especially worrying," he says.

He also expects the so-called second tier of the market - properties of between R2 million and R4 million is set to encounter fairly strong headwinds.

INTEREST RATES
Adrian Goslett, CEO of RE/MAX of Southern Africa, expects interest rates to likely remain low and with the possibility of a slight increase of around 0.5 points during 2021. In his view, this should not have a great impact on the property market. 

"As things stand, the low interest rates - in conjunction with other factors - have created a housing market boom, particularly within the first-time buyers' market. Our prediction is that the Southern Africa property market will continue to see these high sales volumes in 2021 for as long as interest rates remain favourable and homeowners continue to adjust their lifestyles to suit the post-lockdown world," says Goslett.

At the same time, he points out that the struggling economy means lower house price growth.

"Our National Housing Report for the third quarter of 2020, shows the median asking price of sectional titles reflected a 5% drop year-on-year and freehold homes reflected no growth, but remained steady year-on-year. Until our economy recovers from the current pandemic, I predict that house price appreciation will remain low for 2021, reflecting a national average of roughly between 2% to 3% growth y/y," Goslett predicts.

Dr Andrew Golding, chief executive of the Pam Golding Property group, says affordability has improved on the back of the significantly reduced interest rates, with serious sellers responding to the current economic environment with realistic, market-related pricing.

"While house prices have continued to show positive growth in 2020, on a real or inflation adjusted basis they remain in negative territory, reflecting an ongoing price correction in line with the persistently subdued national economic growth rate. House price inflation, as measured by the Pam Golding Properties Residential Property Index, remains positive (at least in nominal terms) – averaging +2.7% in the year to November, the latest available data," says Golding.

He says Cape Town's period of outperformance relative to the other major metro housing markets has "come to an end", with house price inflation slowing rapidly during  2020. The one metro which has outperformed Cape Town since October 2018 is Nelson Mandela Bay.

"This may well be attributable to the semigration of South Africans to coastal towns, with the Eastern Cape as well as KwaZulu-Natal benefiting due to affordability and its lifestyle offering," says Golding.

"For some time the coastal metro housing markets have outperformed their inland peers, presumably due to the ongoing semigration of locals to holiday and retirement destinations. This trend has been significantly reinforced by lockdowns, which have freed people (to some extent) from their need to live close to their places of work."