Legal Articles

Although South Africa breathed a collective sigh of relief as President Ramaphosa announced the start of lockdown level three as of the 1^st of June, it’s no doubt that COVID-19 has had a severe impact of the market value of property in South Africa.

COVID-19 and Market Value of Property in South Africa

According to Remax’s housing market reports, home sales in the country were already showing signs of slowing down between January 2020 and March 2020, before the lockdown had begun.

Data provided by Lightstone property indicates that the Deeds Office recorded a total of 37,609 bond registrations between January and March 2020. What this translates to in terms of percentage is the following:

• 6% decrease in the number of bonds registered year over year
• 2% decrease in the number of bonds registered quarter on quarter

Regional director of Remax, Adrian Goslett, mentioned that the number of unbonded and bonded transfers that were successfully registered at the Deeds Office between January and March totalled to 51,315. In terms of percentage, this translates to:

• 5% decrease from last year
• 7% decrease from the 4^th quarter of 2019

This was a clear indication that the COVID-19 had already started impacting the property market even before it was declared a national disaster.

Sectional Title and Freehold Prices

Sectional Title

According to some of the data, it appears that the property market value of sectional title schemes has been most affected by the COVID-19 pandemic.

The national median price of sectional titles dropped by 8.2% from the first quarter in 2019 with a 5.9% drop since the fourth quarter. This clearly reflects a significant decline.

During this same period, the average bond amount granted decreased by 1.2% since last quarter and by 0.4% since the first quarter of 2019, reflecting the downward pressure on property prices in South Africa.

Freehold

A 5.5% increase in the national median price was recognised for the first quarter of 2019 and 4.6% in the last quarter.

A total of 24,290 freehold properties were transferred countrywide during the same period. This showed a decrease of 12.4% year over year in number of freehold properties sold.

Additional Changes to The Market Value of Property in South Africa were Identified

• Properties valued at less than R400 000 account for the largest portion of sales at 29.2% of the total transfers
• Properties valued between R1.5 million and R3 million accounted for a total of 15.8% of transfers
• Properties valued at more than R3 million account for 5% of the total transfers
• Properties between R400 000 and R800 000 account for 24.2% of the total transfers
• Properties between R800 000 and R1.5 million account for 25.8%

Although with the current economic crisis that South Africans are facing, one would expect to see a drastic decline in activity within the higher priced property sector.

It’s safe to assume that the first quarter gives us a clear indication of what lies ahead in terms of the market value of property in South Africa; we are likely to experience further slowing down of growth as our economy recovers from the direct and indirect consequences of COVID-19.

However, those who can invest in property now will stand to make a healthy return if they choose to take advantage of the current property market in South Africa.

Van Deventer & Van Deventer Incorporated – Property Attorneys South Africa

There is no doubt that COVID-19 has impacted various sectors of the economy while also affected the market value of property in South Africa.

Although there are some negatives, one of the positive outcomes is that property investors may enjoy good returns should they invest in property now.

Our conveyancing attorneys provide extensive, legal advice and support for all your property transfer needs. Contact us for more information.