As I write this, it’s easy to forget that South Africa and the world are in the middle of a global pandemic. Surely the property market should be experiencing some of the worst conditions in recent memory?
At the beginning of the economic lockdown, we took all the advice possible from economists and experienced property leaders to model what we may expect from home sales. The overall consensus was overwhelming – The South African Economy will contract aggressively over the short term and the long term effects of job losses will be felt for a number of years. This in turn will have a very negative impact on consumer’s affordability and that MUST impact the property market negatively?
Well, if all that is true, and surely it must be, why then has O-YES Home Loansgrown Home Loan Intake Revenue by 73% and 54% of units bonded for June year on year, and the growth for July is even stronger? My sense is that there are a few factors to consider.
Firstly, and most importantly, South Africans are a resilient nation! We’ve faced many challenges in our young democracy and we continue to get up, show up and live on. We believe and trust that this pandemic will disappear as quickly as it appeared, but property ownership will remain a life goal that South Africans strive to achieve. This belief is strongly supported by some interesting data. Right now 55% of all home loan applicants are first time buyers and 67% of all applicants are black South Africans. To me, this shows that no matter what gets thrown at us, South Africans want to own their own homes.
Secondly, we are in an interest rate environment that hasn’t been seen in SA for more than 5 decades. To put it plainly, it’s cheaper to buy a home now than rent and South Africans have begun to realize that home ownership is now becoming an affordable reality.
I’d be hesitant to say that the market will remain as strong as it now for an extended period, because we must take some degree of pent up demand into account. But, my prediction is that the crazy volumes we are experiencing now will cool off a bit in the next couple of months and then we’ll settle into a normal healthy property market. So, NO, it’s not a bubble!