AA - May 2020

Author:  RE/MAX Southern Africa
Regional Director and CEO:  Adrian Goslett
15 May 2020

Housing sales drop drastically due to Lockdown, urgent call to reclassify

After over a month in Lockdown, the economic impact of COVID-19 is no longer speculation at this point, but rather proven fact says RE/MAX of Southern Africa.

As one of South Africa’s largest Real Estate Agencies, the company has confirmed it is feeling the impact of the national Lockdown -recording an estimated 54% drop in registered sales.

“Our sales in the first three months were going well, with February 2020 alone yielding an 8% increase in reported sales compared to February of the previous year. By far the biggest drop we saw was in April, which was down by 62% when compared to April 2019,” explains Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

‘Registered sales drop by 54%’ 

When looking at our registered sales, the impact of the Lockdown becomes even more apparent. “In January, February, and March, we saw a 27%, 4%, and 5% increase YoY respectively from last year. However, in April, registered sales dropped by 54%,” says Goslett.

Goslett warns that there will be a knock-on effect on the property market long after the Lockdown is lifted.

SEE: Alert Level 4 Rules | How it affects Estate Agents and the Real Estate industry 

Hard Lockdown started on 27 March, with many lingering restrictions still in place as the country looks to move from Alert Level 4 of the risk adjusted strategy to Alert level 3 at the end of May. Full residential property sales are only officially allowed during Alert Level 2. 

Key stakeholders, including Remax, are lobbying for the restrictions to be changed, as the deeds offices around the country begin operating on skeleton staff, after a delayed opening that was expected to commence on 4 May. 

“There is about a two- to three-month time lag between when the sale takes place (reported sales) and when the final proceeds of the sale reflect (registered sales). No sales in April means that there will be minimal registrations that reflect in June and July. The longer real estate services are unable to operate, the worse this downward spiral will get,” Goslett explains.     

In a typical month in South Africa, between 10 000 and 12 000 bonds overall are registered in the deeds office and, as a sector, property contributes significantly to the GDP, supported by the fact that the deeds office “processed R12 billion in registrations in April 2019”.  

‘Reconsider classification’

“Without real estate services, very few homes can be sold. This will put immense pressure on the sellers who need the cash to survive during these tough times, not to mention all those employed either directly or indirectly within the real estate sector who will go without an income unless they are able to operate. The longer this continues, the worse the situation will get. We urge Government to reconsider their classification of the residential real estate industry, which is currently only allowed to re-open at Lockdown level 2, to give the economy a fighting chance for recovery,” says Goslett.

While another 25 basis points cut is forecast for when the Reserve Bank meets next week Thursday on 21 May, concern is being raised the industry cannot operate fully – even though it has drafted hygiene guidelines to ensure social distancing and the minimal contact when conducting real estate operations that cannot be done remotely.

“As an industry that contributes about 5% of South Africa’s GDP and that employs 42,000 people in the residential sector alone, we urge government to reconsider their reclassification of the real estate industry so that our economy has a better chance for recovery,” says Goslett.

READ: Sharp 2% rate cut needed instead of 5 staggered cuts planned up until 2021

Government needs to do more to ensure the property industry is able to survive the current pressures of the Covid-19 pandemic, CEO of bond originator BetterBond, Carl Coetzee previously stated – following the last 1% drop in the interest rate at the end of May. This cut has seen an historical low as the prime lending rate was last at 7.75% in 1973. It now allows for significant savings, particularly in the long term.

“Any measures that seek to stimulate the market and ease the financial burden on the consumer’s pocket is a step in the right direction to buoy the property market. But while the drop in the repo rate is a good start, additional strategies will need to be put in place to secure the long-term survival of the industry.

“One such measure could be to suspend the transfer duty on property valued up to a certain amount,” suggest Coetzee.

READ: How SA’s three major provincial property markets will weather the Covid-19 crisis

He is calling for a six-month window to raising the threshold on transfer duty, which currently stands at R1 million, to R3 million, “could mitigate the risk of the industry contracting significantly as we start, what is sure to be, a slow economic recovery”.  Transfer costs can be as much as R 189 211 on a bond of R3m.

In a letter to the Department of Human Settlements Minister Lindiwe Sisulu, Remax outline the following:

Risk of transmission

According to the risk-adjusted strategy paper, real estate activities scored an overall rating of 10 (medium risk category). We address some of the criteria that were used in establishing the risk below.

  • Ability to screen all employees

We can ensure that all real estate agents be temperature screened at real estate offices. Regulations can be made to implement compulsory staff health screening, observe stringent personal and client safety measures such as masks, sanitising of hands and vehicles and physical distancing. We would accordingly have the ability to identify and isolate ill employees.

  • Ability to enforce social distancing of 2 meters

It is our view that the risk of infection when dealing with an estate agent is low as social distancing rules can be applied absolutely.

  • Real estate as a professional service

It is our view that Real Estate should be classified as a Professional Service. The Estate Agency Affairs Board requires all estate agents to complete a Professional Designation Examination and maintain Continuing Professional Development in order to be issued with and keep their Fidelity Fund Certificate. This is a professional certification endorsed by the government.

  • Percentage of employees who use public transport

Almost all estate agents use their own private transport. It is one of the very first questions and requirements when an estate agent is appointed.

Administrative staff are more likely to use public transport and we therefore suggest that they be treated and classified differently.

We accordingly request that a distinction be made between Professional Real Estate Services (an agent with a Fidelity Fund Certificate) and other real estate activities (administrators and support staff in the real estate field).

  • Percentage of employees who must cross provincial borders to start work

There is no need for cross border services to be provided in real estate. Agents have always referred clients to other agents that are located in the relevant city or province in which the service is required.

When the risk ratings in the risk-adjusted strategy paper are considered, we are of the view that real estate should be lowered to a rating of 4.

Proposed regulations and guidelines for residential sales and letting:

Open Homes & Private Viewings

  • No open homes or show houses will be allowed under Level 4. We suggest that this should only be allowed under directives at Level 2.
  • Private viewings strictly by appointment only and with the consent of the client and property occupants. Estate agents will ensure that only buyers who are serious about making an offer on a property, or are in the process of making an offer, are given a private viewing.
  • The number of private viewings per day can also be limited to only 2 per day and surfaces can be cleaned between viewings.
  • Consider online viewing methods (virtual tours, video conferencing software) where possible
  • Pre-registration and recording in a register of all private viewing attendees. With the written consent of the person being captured in a declaration, the agent will capture a copy of the identity document (for instance photo) and record the physical address and phone numbers to assist with contact tracing. This register will contain details of the time, date and address of the visit.
  • All attendees to be e-mailed COVID-19 information beforehand, including hygiene expectations
  • Information to include instructions that the private viewing is ‘contactless’ and surfaces cannot be touched by attendees. The agent (wearing gloves) will open any doors/ cupboards on behalf of attendees
  • Agent to open internal/external doors as appropriate beforehand to minimise risk of surface transmission
  • Property owners/occupants to leave premises during viewing, where possible
  • One private viewing at a time. Viewings to be spaced sufficiently apart to allow time for sanitising after each viewing, as required, and to ensure there is no contact between attendees
  • Maximum of two people from the attendee’s family to attend a private viewing
  • Attendees to wait in their vehicles until agent advises they can enter, to ensure that there is no contact between attendees
  • Only one agent to attend a private viewing
  • Shoes removed prior to entry
  • Physical distance of at least 2 meters to be maintained at all times
  • Agent to wear gloves and hand sanitizer to be available for use by all attendees entering and exiting property
  • Keep private viewings very brief
  • No private viewings at properties where a person living at property is, or has been in the 14 days prior to the viewing, unwell or is self-isolating
  • Display COVID-19 information and hygiene notices at property
  • Those feeling unwell, have travelled overseas recently, are self-isolating or have been in contact with a confirmed case of COVID-19 may not attend the viewing
  • High risk people should consider not attending the viewing (e.g. those over 60 or those with other existing medical conditions)
  • Afterwards, sanitize or use antibacterial wipes to wipe down areas attendees may have accidentally touched

Appraisals & Listings

  • Agents may visit the property to conduct an appraisal or evaluation. Agents must adhere to physical distancing (at least 2 meters)
  • Do not attend property if occupants have been overseas recently, are self-isolating or have been in contact with a confirmed case of COVID-19 within the last 14 days
  • Only one agent to attend the property
  • Minimise time at property
  • Minimise in-person contact with the client/s
  • Clients may take their own videos and photographs for listing purposes. If a photographer or videographer is attending the property, they must:
    • adhere to physical distancing (2m)
    • not attend property if the occupants or buyer have been overseas recently, are self-isolating or have been in contact with a confirmed case of COVID-19 within the last 14  days, or if they or anyone they have been in contact with have been a confirmed case of COVID-19 within the last 14 days
    • minimise their time at the property
    • minimise in-person contact with the client/s
  • Agents must use virtual methods to share new listings with their colleagues

Contracts

  • Contracts should not be executed in person with the estate agent present
  • Contracts can be drawn up digitally and delivered to the client
  • Contracts can be explained and discussed using online technology
  • Signed contracts should be collected by courier\


Pre settlement inspections and purchaser due diligence

  • Where permitted through government sector classification, if a professional (for example, a building inspector, valuer or engineer) is attending the property, they need to:
    • adhere to physical distancing (2m)
    • not attend property if occupants have been overseas recently, are self-isolating or have been in contact with a confirmed case of COVID-19 within the last 14 days
    • limit number of persons at the property (e.g. have professionals attend separately)
    • minimise their time at the property
    • minimise in-person contact with client/s
  • Purchasers should not attend the property with the professional (inspector, etc.). We recommend they join by phone or videoconference if they wish to.
  • Agents who provide the professional with access to the property should wait outside or in one room in the house while the professional works
  • The contact details of any professional visiting the property should be recorded together with the date they attended, to assist with contact tracing
  • Ask the professional to sanitize areas they may have touched – or ask them to wear gloves which can be disposed of immediately after the visit

Settlements and moving

  • Clients moving home should be permitted in accordance with government regulations
  • Agents should arrange for sanitized keys to be provided with no physical contact between any party

Real Estate Offices

  • Workers must work from home where they can
  • Offices to remain closed to the public
  • Display COVID-19 hygiene information and provide hand sanitizer
  • Ensure 2 meter physical distancing measures in place
  • During Level 4 minimize the number of people in office at any one time to 1/3 of the workforce

The original article can be viewed here: