News

Author:  Carl Coetzee
CEO of BetterBond
6 July 2021

Unexpected rally continues for SA’s property sector

South Africa’s economy needs all the help it can get, as the impact of the third wave takes its toll. Confidence is high in the property sector, as the interest rate continues bode well, bringing with it positive knock-on effects.

With the residential housing market contributing upwards of R191 billion to South Africa’s economic growth, and at least R46 billion going directly to the fiscus because of these property purchases, buying a home is about so much more than just putting a roof over your head, says Carl Coetzee, CEO of BetterBond.

“By buying a home, you are in fact contributing to the country’s economic recovery and sustainability.”

According to StatsSA, economic activity in the real estate sector increased at an annualised rate of 7.4%, mostly driven by property services – reflected in the rise in bond registrations – and the banking sector.

“This is mirrored in BetterBond’s numbers, where the volume of bond applications increased by 60% year-on-year for May,” says Coetzee.

Real estate also accounted for the largest contribution to the GDP in the first quarter of this year. Recent estimates put the value of South Africa’s property sector at R5.8 trillion, with formal housing registered at the Deeds Office making up the lion’s share with a contribution of R3.9 trillion.

“The housing market has enjoyed a remarkable and unexpected rally in recent months, notwithstanding the many financial challenges wrought by the pandemic. The decision to drop interest rates – to the lowest they have been in 55 years – has resulted in a surge in buyer activity,” says Coetzee.

Initially, this was concentrated at the lower end of the market, as first-home buyers made the most of the favourable lending environment. “But now we are seeing a steady increase in bond applications across most price bands, as the realisation that the repo rate is likely to remain below 4% for a while yet makes property an attractive investment.”

This growth in the housing market is also a win for the South African Revenue Services, adds Coetzee.

“Property taxes contribute significantly to the country’s revenue, and its economic sustainability. These taxes include the transfer duty payable on properties of more than R1 million, as well as donations tax for the disposal of a property.” The pandemic, and need for a vaccine rollout, has placed greater demands on government revenue. The real estate sector’s contribution to the revenue pool is therefore critical, says Coetzee.

With unemployment hitting a record high of 32.6% in June, an increased demand for housing will go a long way towards creating jobs, adds Coetzee. In a 2014 report on housing solutions, UCT’s Professor Francois Viruly showed that, for every house built, at least three direct jobs and two indirect jobs are created.

“Many more jobs are created indirectly during the house buying process. It starts with the bond originators and attorneys who facilitate the process, and extends to the moving companies, as well as the decorators and landscapers who put the finishing touches to a home,” says Coetzee.

“All of these aspects provide opportunities for businesses to generate an income. In a country where 7.2 million people don’t have work, the role of the real estate sector as a creator of employment is significant,” he adds.

The latest Absa Homeowner Sentiment Index (June) measuring the first quarter of 2021, shows a fourth consecutive period of positive sentiment towards buying property.

Furthermore, sentiment in favour of buying a property grew faster than that towards selling a property, for the second consecutive quarter.

“When confidence is high, more people buy property and this in turn has a positive knock-on effect on job creation and income growth,” says Coetzee.

“Buying a home is not only an investment in your future, but that of South Africa’s as well.”

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