It’s no understatement to say that the last 24 months have been an experience – Depending on who you ask, where you are in the world and what has changed in your personal life, both 2020 & 2021 has been nothing short of a rollercoaster ride for many. Unsurprisingly then, the South African property market has also seen considerable changes in the past 12-24 months.
To better understand the current state of the South African property market, Residential People has spoken with many leading agencies in the country, who have informed us of the noticeable trends taking place across the sector.
One of the most commonly discussed property trends occurring in South Africa is semigration. For those unfamiliar with the term, ‘semigration’ refers to movement from one part of a country to another, a sort of internal immigration/migration, if you will. Semigration is the direct opposite of emigration (the act of moving to another country).
While South Africa has long had a history of semigration causing population booms across the country, the impact of COVID-19 has seen semigration well and truly soar.
As stated by Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty (Sotheby’s) believes: “Remote working now allows people to live where they want to rather than in close proximity to work”. The growing trend of people migrating to rural or less dense environments is not strictly limited to South Africa mind-you, as it has also taken place across the UK and no doubt other countries as well.
Yael prophesies therefore, that going forward into 2022 and beyond, South Africa “will see more people move further out from Central Business Districts, whether it be to the suburbs, outer lying areas or to different provinces.”
The ongoing trend of semigration has also been sighted by other agents we spoke to at Sotheby’s, including Chris Cilliers, CEO and Co-Principal of Sotheby’s Winelands and Arnold Maritz, Owner of Sotheby’s Cape Town.
In our discussion with Chris, she believes that: “The semigration trend will continue into 2022”, citing that she feels that we will see semigration occur not only from Gauteng Province but also from KwaZulu-Natal and the Garden Route as well.
Meanwhile, Arnold states that semigration is “one of three noticeable trends” that he has seen throughout 2021. In addition, Arnold remarks that his division of Sotheby’s has also seen a “trend of people moving away from the larger metros to smaller towns and coastal areas, due to their new-found ability to work from home.”
Discussing how migration has affected the property market in Cape Town, Arnold (pictured below, right) states: “The local property sectors in Cape Town have fared well compared to some of the inland cities across the country. [However,] work-from-home changes have caused more of an exodus from the inland cities and more of an influx into the coastal cities. This [semigration] has resulted in healthy demand for property in most areas of Cape Town and consequent stable to slight inflationary pressure on prices.
“Having said that, the Cape Town property market is still experiencing a reasonable balance between supply and demand.
“Some of the smaller coastal towns along the Garden Route like Plettenberg Bay and George have felt the effects of the migration to a far greater degree, with demand far stronger than supply, leading to high price growth, and a shortage of property for sale.”
High prices and, in particular, increased demand for property is another one of the three major trends currently taking hold of the South African property market.
During our conversation with Arnold, he mentioned that the two other trends he has personally seen have been: “A preference for purchasing a property rather than renting” as well as “a move away from sectional title apartment type living in preference for larger freehold freestanding properties with gardens.”
Arnold attributes the rise in people moving from apartments to be “largely as a consequence of some ‘cabin fever’ experienced by residents of more compact apartments during the hard lockdown period” – This feeling of wanting to escape a city setting has been echoed in the UK as well, which also saw an exodus of people from inner-city areas to larger suburban dwellings.
In a previous interview with Business Tech South Africa, Dr Andrew Golding (pictured right), Chief Executive of the Pam Golding Property Group, said that homes priced in the luxury band (R10 million and above) have performed exceptionally well. Both Chris and Arnold at Sotheby’s agreed that the sales of luxury homes have been on the rise, with the latter stating he saw a 27% increase in luxury sales (average price of R18m) between November 2020 to October 2021.
Chris (pictured left) meanwhile added: “We have had a fantastic year in terms of high priced properties and we see no change happening in that department.”
However, highlighting a cause for concern, Chris reiterated Arnold’s point that supply does continue to outstrip demand. She states: “Our biggest worry is stock shortages as the buyer demand (over all price ranges) has to a large extent, outstripped the supply.”
The rise in sales has also been seen in the South African auction market. To learn more, we spoke with MC du Toit, CEO of Sales at popular auction firm BidX1 who stated: “There has been a notable uptick in demand for residential properties” – adding: “Apartments and townhouses in sought-after areas are achieving strong results on our platform.”
MC (pictured right) continues: “On our platform, these [luxury] assets are attracting multiple bidders, which is driving up the final price.
“[For example] A Winelands property recently attracted 10 bidders, resulting in 48 bids on the day of the auction – and a final sale price of R19 million – while the sale of a mixed farming opportunity in Limpopo concluded at R20 million.”
As in most countries, property auctions, particularly online auctions, are often the preferred method of sale for unique or luxury assets. Auctions typically tend to attract a wide range of bidders and also can reach an international audience.
Traditionally, the international market has been a small part of the South African property sector. However, the weakening rand and the ongoing COVID uncertainty have seen a rise in foreign interest/investment in the country.
Nobenguni Nkuli Bogopa (pictured left), the Chief Operating Officer for Property Management at Broll Property Group. Nkuli, who manages several high-end residential portfolios like the Yacht Club in Cape Town and Melrose Arch in Johannesburg, stated that the trend of foreign ownership is on the rise.
Commenting on these luxury portfolios, Nukili said: “those kinds of residential properties are [increasingly] attracting international buyers who then use them for rental purposes.”
2020 and the early part of 2021 proved to be a challenging time for South Africa due to the harsh travel restrictions imposed on it by the international community. However, once the global travel restrictions were lifted, business began to boom. Describing this experience, Chris Cilliers said: “we saw the lifting of restrictions have an amazing effect almost immediately and we have already done several sales to international clients over the last couple months.”
While the lockdowns of 2020 might be a thing of the past, South Africa is now dealing with the fallout of the current Omicron variant. Omicron, reportedly much more contagious and easier to spread than other variants, has affected business and international tourism across much of southern Africa.
Unfortunately, it is still unclear and too soon right now to see what impact the Omicron variant and the subsequent travel bans will have on South Africa’s fledgling international buyers market. Highlighting these concerns, however, Chris said: “Unfortunately, this (optimism and rejuvenated market) has been a bit short-lived as we are now back in the red list and very heavily into our 4th wave with a very transmissible variant.”
Chris continues: “It (the effects of Omicron) will without a doubt, have a dampening effect on our international clients who cannot visit the country to see property. Many have had to cancel their travel plans and many that were in the process of viewing property had to leave the country before they could buy.”
If COVID-19 has taught us anything, it’s to expect the unexpected. So while restrictions are currently in place as the world waits to see what path the new variant will take, this is far from the end of the story for the South African property market.
From our discussions with a number of property professionals throughout the country, it’s clear to see that the three major property trends of semigration, an increase in sales & demand and the rise in foreign investment are set to continue into 2022 and beyond.