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Mixed fortunes for South African property in 2021

Home Infrastructure Property & Development Mixed fortunes for South African property in 2021

South Africa’s property market mirrored the turbulence and resilience of the country’s political economy in 2021, writes Hayley Ivins-Downes, Head of Digital at Lightstone Property.

WHILE the pandemic continued to weigh heavily on South Africa’s economy, the introduction of vaccinations and the milder Omicron third wave have lifted the mood and are helping to activate economic activity while low interest rates have certainly boosted residential property in certain areas and value bands.

However, the unrest in KwaZulu-Natal and Gauteng in July caused significant damage to infrastructure and property and rattled confidence.

At Lightstone Property, we’ve identified a number of key developments which reflect changing consumer behaviour and its impact on residential, retail, and commercial property.

Retail property: wealthier shoppers go online, mall visits drop

Visits to shopping malls have stabilised at around 80% of where they were in January 2020, before the pandemic struck.

Not only has the pandemic reduced mall visits, but it has changed the amount of time shoppers spend at malls. Short and long visits have been replaced by “mid-length” visits, probably because shoppers have cut back on “impulse stops” as well as restaurant, cinema, and other leisure-activity-based visits which are likely to last longer than an hour.

The dwell times mirror the severity of lockdown restrictions, with shoppers spending less time at malls during periods of greater restriction and more time when restrictions ease.

Visitors from wealthier areas have cut their visits to malls, suggesting an increase in online shopping and greater stockpiling of groceries.

A study carried out by Deloitte reported that despite the decrease in shoppers felt by the malls, e-commerce saw the reverse, with South Africans online retail penetration now sitting at well over 22 million consumers making purchases online in 2020.

Commercial property: still lagging pre-Covid-19 levels

There was a slight increase in Commercial property transactions, although the sector has not yet recovered to pre-Covid-19 levels recorded in 2019. The value of transactions is down on 2020 though, with Commercial property at R35bn (2020: R36bn), Retail the same as 2020 at R15bn, Industrial at R12bn (2020: R13bn) and Office R9bn from R12bn the year before.

Residential property: Mid Value to Luxury recovers, Affordable struggles

Transfer volumes increased in 2021 compared to 2020, reversing five years of consecutive decline. Although Affordable housing transfers fell for the sixth consecutive year, Mid value, High value and Luxury all moved forward positively from the lockdown lows of 2020.

Despite the drop in numbers, the value of transfers has reached a six-year high at nearly R279bn, well up on R225bn last year and the previous best of R244bn in 2018. Each of the value bands also recorded their best numbers for the last six years.

There were marginally fewer first-time buyers in 2021 (106,417 from 106,617 in 2020) but significantly it was first time buyers in the Affordable value band who were most affected by the pandemic and tough economic conditions as purchases dropped from 37,353 in 2020 to just 31,780 this year – and that is well short of the 46,995 in pre-pandemic 2019.

However, there were more first-time buyers in the Mid, High and Luxury value bands. Despite the reduced number of first-time buyers, they spent more than ever on their houses – R75.6bn compared to R66bn in 2020.

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