Has the Global Relocation Trend Reached South Africa?
Across the globe, Covid-19 has been responsible for shifting the demand for property. While we have seen city centres, such as London and Hong Kong, lose their appeal, property in more remote locations – offering increased space and affordability – has become more desirable for both tenants and homeowners.
With the rise of remote working across South Africa, we’re beginning to see this global trend happening across Western Cape. Before national lockdowns forced the majority of workers to swap their corporate offices for the kitchen table, Gauteng was home to many professional workers searching for easy access to their workplace. However, much of Gauteng’s population is now swapping the noise of the province for the suburbs and quieter towns across Western Cape.
What is driving this trend?
The move to remote working has been significant for many reasons, not only has it changed business’ perspectives towards flexible working, but it has also encouraged a reconsideration of what tenants and homeowners value in a property.
Across Hong Kong and London specifically, we have seen moves from city centres to remote locations, in search of more spacious homes and a better balance of life and work. With South Africa spending the majority of 2020 in some form of lockdown, estate agents across numerous provinces are now seeing an influx of enquiries from city dwellers looking for larger homes.
While 2021 could see the return to some degree of normality, remote working will likely remain an option for the majority of office workers across South Africa. With this increasing sense of permanency, the desire for larger homes stems from the demand for home offices, especially as some businesses cut their losses and completely move away from corporate working spaces.
As tenants and homeowners re-assess their property demands, the threat of Covid-19 has been responsible for bringing families closer, many of whom moved in with extended family over the lockdown period. In search of more permanent living solutions, this increased cohesion is thought to also be driving the trend towards bigger homes.
Where are we seeing this trend?
As the hub of South Africa’s financial and business services, it is no surprise that Gauteng has the biggest proportion of the country’s population. However, the relocation trend we are now seeing throughout South Africa is driving more city-goers from this province to Western Cape.
Western Cape, Cape Town especially, has always been a popular choice amongst South Africans, so much so that professionals have been known to commute to Gauteng in the week for work, before returning to their families in Western Cape every weekend.
Cape Town isn’t the only suburban area in Western Cape experiencing a surge in demand, with the likes of Melkbosstrand, Pearl and George becoming firm favourites amongst city dwellers. In comparison to the political instability and perceived municipal mismanagement of big cities, these small suburban towns are a breath of fresh air for homeowners and tenants.
Amongst beautiful beaches and good schools, Western Cape also offers less traffic, safe neighbourhoods and cohesive communities. The appeal of Western Cape is so strong that, according to South African estate agencies, around 90% of their enquiries are from city dwellers – most of which are young professionals and families.
The ripple effects of this demand have spread far and wide across South Africa’s property market; not only are sales across Western Cape increasing, but the rental market is said to be booming.
Alexa Horne, Managing Director of Dogon Properties, says: “one of the reasons that Cape Town’s rental market is doing so well is that semigrants often rent initially while they ascertain which area they want to live in and search for the perfect home to buy.”
What does this mean for property investors?
While Covid-19 caused many economic struggles across the globe, the pandemic only worsened South Africa’s economy. 2020 saw the country enter a deeper recession, in which GDP decreased for four consecutive quarters – falling more than 16.4% between the first and second quarter.
The majority of countries across the world are anticipating economic rebounds for 2021, from the distribution of the Covid-19 vaccines. But with South Africa’s existing economic issues pre-Covid, and their decision to delay their vaccination programme, the strength of the country’s recovery is uncertain.
Although some remain hopeful for an economic rebound this year, there is increasing doubt surrounding how long the economy will take to return to full prosperity. Unlike the UK’s strong 2021 forecast, it has been argued that it could take at least four years for South Africa’s economy to return to full prosperity. However, the country will continue to be vulnerable to local resurgences of the pandemic.
With this economic distress causing property prices to fall across South Africa, this buyer’s market might initially be appealing to investors, but on a long-term basis, it isn’t so beneficial. A delayed economic rebound equals sustained unemployment, less liquid cash throughout society and subsequently, less demand to maintain property and rental prices.
Promising growth in prices is a key factor of investing in property, with it signifying competitive rates of return. The UK market can be used as an example: not only did the property industry thrive during Covid-19, but prices have been in an upward trajectory for months, with 4% growth forecasted for 2021.
With this in mind, it’s no surprise that we’re seeing more international investors – especially those in South Africa – opting for a Buy-to-Let property investment in the UK. With more affordable markets, competitive rental yields and better long-term potential, it’s something to consider as the UK market appears to enter another upswing.