Siphamandla Mkhwanazi, FNB Property economist, gives FNB’s expectations: Covid-19 will have a sharp but shortlived impact on SA’s housing market.
Transaction volumes will, in the short term, take a bigger hit relative to prices. In contrast to international housing markets, however, the overall recovery in SA will probably be drawn out because of pre-existing weakness in consumer fundamentals.
While aggressive cuts in interest rates and a possible reduction in house prices will eventually support purchasing activity, in the short term this will probably be outweighed by heightened uncertainty and second-round effects on the labour market.
In the end, the magnitude and endurance of this weakness will depend primarily on a rebound in the broader economy, sustained liquidity in the property market and material improvement in sentiment. The impact could linger for longer if liquidity dries up and lending standards tighten more than expected.
“We will keep a close eye on developments and revise our forecasts as more data becomes available. But we expect mass job losses and heightened uncertainty to result in a sharp drop in transaction volumes, as buyers delay their purchasing decisions,” says Mkhwanazi.
Pre-Covid-19, the FNB House Price Index showed house price appreciation slowed to 2.8% y/y last month, the lowest point since May 2011.
The impact of the lockdown on volumes and prices is yet to reflect in the data. On the upside, though, search engine data shows a rebound in web traffic to property portals in SA since lockdown. This is also a worldwide phenomenon.
While it is too early to definitively draw conclusions, this could be an early indication of burgeoning bargain hunting by investor buyers and/or pent-up demand from first-time buyers looking to capitalise on this market.