What will happen to the Cape Town property market after Covid-19?
Category Cape Town Property Market
Lockdown measures instituted by the government in 2020/2021 have had devastating financial consequences for most businesses in South Africa which have led to a shrinking tax base, job losses, pay cuts, mortgage and personal defaults which has left many Cape Town property owners wondering; what's next for the property market in an area such as yours?
We hold a relatively optimistic short to medium-term view and feel that the outlook may not be as bleak as many may have expected.
Last year, the Reserve Bank really came to the party by adjusting interest rates to historical lows which many economists have described as "throwing oil onto a fire". The banks threw lifelines to sellers in the form of interest payment holidays, kept their lending requirements relaxed and their wallets open by continuing to grant 100% bonds despite the riskier economic environment. Furthermore, the government provided tax relief measures for
businesses in an effort to keep companies afloat and people employed.
These measures meant that homeowners that needed to sell weren't forced into urgent sales and when they were ready to sell, buyers were waiting in the wings which prevented prices from falling off a cliff as we saw in the 2008 financial crisis whereby, in contrast, the banks pulled back on lending, increased financial requirements from applicants and governments financial relief was limited.
Over the past 12 months, we have experienced high levels of sales activity under the ZAR 5 Million mark which is where the bulk of turnover exists in the Western Cape. Within this bracket, whilst turnover has increased, prices have been flat-lining in most areas.
Looking to the future, whilst many businesses have scaled back their operations significantly or closed down permanently, there are new enterprises in a multitude of sectors popping up daily, breathing new life into the market which we believe has the potential to cause an economic rebirth that could fuel an exciting rally in markets and the economy over the next 2-5 years.
For now, we expect first time buyers to continue to play an active role in fuelling demand for residential property, coastal towns to remain attractive options given increased "work from home" models, investors selling to take advantage of the strong rand and homeowners looking to upscale, are all contributing to sales activity levels.
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Author: Ryan Greeff
