As the aggregate economic and political turmoil experienced by South Africa continued into 2020, it could be argued that the outlook for both the economy and real estate prices is bleak. Many observers fear that South Africa may yet succumb to another world recession because of tighter financial conditions, overvaluation in stock markets, and limits on credit availability.
It is possible to find areas of hope in countries, like South Africa, where the COVID-19 pandemic has put stress on the economy. They are experiencing a housing resurgence, despite that setback.
The COVID-19 disaster has affected just about every sector, and the housing market is one of the casualties. There has been a renewed demand for properties because survivors must find a new home immediately to isolate themselves from the virus and because their previous house – even if it still stands – may not be adequately fortified against contamination. Along with all other forms of property in America, residential housing prices have spiked since the COVID-19 Disaster.
Factors that lead COVID-19 to spin out of control include:
COVID-19 created new volatility in the housing market. Lingering demand has moved up to an earlier time frame, with prospective buyers rushing to avoid COVID-19 related lockdown of new homes later this year.
With the work-from-home norm, many people are realizing that there is more desire for larger homes because of the higher demand for a comfortable working environment. COVID-19 has caused an interest in the Home Contractor Industry due to the demand for specialty developers and collaborators.
The COVID-19 has contributed to the resurgence in housing demand. The impact on consumer purchasing of all types has benefited mortgage loans specifically with an average interest rate drop of 0.44%. These low rates have started at the start of 2020 and benefitted mortgage loans.
The South African Reserve Bank (SARB) cut the rate by a further 1% in April 2020, for economic reasons after cutting it by the same amount earlier in March. It was then cut again by 0,5% in May and was lowered to 7%, the lowest level in over 50 years. In response to concerns from actuaries about low-interest rates good values homes became good values for buyers, but not as many transactions took place because people don’t want to use their savings or income.
Lower mortgage rates have created an environment for property investment, where prospective home buyers are looking to seize the opportunity before mortgage rates rise again.
We look to the future for predictions for the property market
- A new study shows that COVID-19 had an effect on Buy-to-let
A study conducted by Momentum Corporate revealed that only 40% of millennials are interested in homeownership. Generation Rent is better for landlords than it is for homeowners because they generate demand for rental properties.
- Explaining COVID-19’s impact on the housing market
Thanks to COVID-19, houses are now less expensive for the average buyer. But, prices are expected to continue trending downward, as this unforeseen event causes properties to be sky-high.
- How housing and COVID-19 are intertwined
The affordable housing market is enjoying brisk trade, while the luxury housing market sees price deflation. Government subsidies are driving the flow into both markets. These are designed to support first-time home buyers, provide them with funds for low and medium-income earners, and cut down on paperwork for properties purchased at less than R1 000 000.