While the true effect of the lockdown will only be evident in a few months’ time, once the dust has settled around the re-opening of the economy, the real estate market is still vying for an optimistic outlook. But even though it is still a buyer’s market, thanks to various measures that have been taken pre- and mid-lockdown to assist the economy, general sentiment continues to lead towards caution. This makes any noticeable growth and accurate prediction difficult.
What remains true, is that conditions are favourable for buyers due to the lowered interest rate, where the prime rate currently stands at 7.25%, the lowest it has been since 1973. But it is unclear how much this will influence the negative economic outlook, with the South African Reserve Bank downgrading the 2020 GDP forecast for South Africa to -5.8% during April 2020.
Many property agencies have seen increased web traffic since April, though not with the same amount of click-through or form-filling activity, which further indicates the cautious atmosphere surrounding real estate activity at the moment. As far as the property market goes, general interest seems to still be present. When this will return to active interest that leads to economic action remains to be seen. For now, registered property sales are, understandably, at a low point.
A ray of hope concerning the economy may be found when one looks towards the American economy, which has remained minimally affected overall, even though their infections far outreach our own. This indicates that the effect of the lockdown largely relies on how restrictions inhibit economic activity and how prepared workforces are to work remotely. In South Africa, remote work has also became a vital part of many employees’ ability to survive during the lockdown, and also the means through which many businesses were able to minimise the effect the lockdown had on their finances. Prior to the hard lockdown of March 2020, many businesses had already started rethinking the viability of remote work options to allow employees to work safely from home without having their concerns for safety affect their productivity. When the lockdown was announced, many businesses followed suit and found ways to retain productivity through work from home measures.
An unforeseen result of these remote work solutions may, however, be a reduced need for office space in the near future. A majority of businesses continued to pay rent during the lockdown, even if it was just partial rent thank to force majeure clauses where the business no longer enjoyed full occupation of their properties, leaving them with an expense that could have been utilised in more economically beneficial ways. Due to this, many businesses have begun considering the possibilities of permanently utilising remote work which will allow them to rent minimal office space, which in turn will allow them to rework their financial plans going forward.
Along with the small businesses and franchises that have been forced to close down after the financial strain of the hard lockdown, changes in office space demand will further increase the uncertainty surrounding what the commercial real estate industry’s future holds.
As has been the norm in all spheres of life and business throughout the pandemic, uncertainty still surrounds what the future may hold for the residential and commercial real estate market. But no matter how the winds of change may affect the country, the prospect of new and exciting property investments that will accommodate the needs of residents and businesses in a changed world still remains.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)