After a turbulent 2020, are we seeing a pattern of recovery starting for South Africa? While the entire global stage has been impacted by the pandemic, both South African property and the economy was particularly hard hit.
Now, after a bounce back at the start of 2021, the country is forecasting a brighter future ahead.
Each month, we’re examining the South Africa property trends in 2021, taking a closer look at the local market and seeing how that compares with other global markets – with a particular focus on why investors are investing in UK property from South Africa in 2021.
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Rental Market Now Characterised by ‘Diminishing Demand’
Countless lockdowns and Covid-19 restrictions throughout 2020 presented the South African property market with many challenges. However, as South Africa emerged from a tough lockdown in Q2 2020, the rental market seemed to finally be on the road to recovery.
While this increase in activity saw the market recover to a certain extent, this was only temporary. The rental market has since seen downward pressure in all areas, especially tenant demand. With a significant lack of activity, experts have concluded that ‘diminishing demand’ is at the root of increased vacancies and lower rental escalations.
The downfall of South Africa’s rental market has been attributed to many things, but the desire to downscale is the most significant. The pandemic has left the economy unsettled and many employees with pay cuts, which in turn, has led to more tenants cohabiting to save on their monthly rents.
Vacancy rates somewhat stabilised in Q2 2021 at 13.1%, down from 13.31% in the first quarter. However, rental properties priced at R3,000 or less are now thought to have the highest vacancy rate on the market, with only 65% of these tenants in ‘good standing’. The uncertainty of the South African rental market only highlights the resilience of UK property and increases the appeal of these Buy-to-Let opportunities.
South Africa’s Semigration Trend is Growing
Across the world, the workplace has changed beyond measure and some companies will never return to pre-Covid practices. The working from home phenomena has transformed the lives of both employers and employees, and in South Africa, it seems to be a permanent change.
As more and more employees now have the freedom to work from home full-time, there is a ‘semigration’ trend growing across the country. Fuelled by the desire to achieve the perfect work/life balance, many homeowners are now relocating to coastal provinces and suburban areas.
The likes of Western Cape and KwaZulu-Natal are proving to be popular destinations amongst out-of-city movers. While the retired and the wealthy were once the only citizens living in these areas, the ‘zoom boom’ has made these desirable locations more accessible for the majority of South Africa.
According to Dr Andrew Goulding, chief executive at Pam Goulding Property Group, however, semigration is not a brand-new trend that arose purely as a result of the pandemic. Instead, he suggests that it has been happening over the past 2-5 years and has been accelerated by the global pandemic.
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More South Africans Are Looking to ‘Urgently’ Sell Their Homes
Partly fuelled by the rising semigration trend across South Africa, more homeowners are now looking to ‘urgently’ sell their homes. According to recent statistics, getting out of a ‘financial squeeze’ and relocating are now the most common reasons for South Africans wanting to sell their homes.
The economic impacts of Covid-19 have spread far and wide across South Africa. Specifically, the latest FNB Property Barometer claims that 21% of homeowners are selling because of financial pressures, while 22% are doing so to emigrate, relocate or move closer to work.
The urgency amongst these sellers is increasing to the extent that most sellers are now willing to compromise on price if it means a quick sale. The average difference between asking and selling prices has reached about 8%, although this is often much larger if the seller is in more of a hurry.
South Africa’s Unemployment Rate Rises in the Ranks
Not only has the workplace seen unprecedented change as a result of the global pandemic, but South Africa’s unemployment rates have also seen some turbulence. An inevitable side effect of the economy’s struggles has been a rising unemployment rate, which has now reached new levels.
In an analysis of 82 countries across the globe, South Africa’s unemployment rate was the highest at 34.4%, having risen from 32.6% in Q2 2021. While this unemployment rate remains the highest across the world, the silver lining is that these figures have fallen since Q1 2021, when the unemployment rate reached 44.4%.
Job losses across multiple sectors have contributed to this rising unemployment rate, with the financial industry being the hardest hit overall. With 278,000 jobs lost, the finance sector significantly outpaced the next sector – the community and social services industry which recorded a loss of 166,000.
While the majority of the labour market has seen some turbulence, experts anticipate that unemployment rates could continue to fall by the end of the quarter as government efforts keep Covid-19 infection rates at bay.