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2020 Residential Property review
26 Jan 2021 10:00 am
by John de Villiers, Editor Lexis Digest, LexisNexis South Africa
By virtue of its sheer size, value and nature, the residential property market is integral to the business, legal and information technology worlds, certainly for LexisNexis, conveyancers, banks and estate agents. Here’s a quick roundup of some of the big issues, stories and trends which marked the 2020 residential property year.
Its size and value to the economy
South Africa’s residential property market is the largest component of the South African property market, comprising the majority of property assets within the country, and an important component of household wealth. Some estimates calculate property’s contribution to GDP to be as high as R191-billion, with a R46-billion direct contribution to national revenue.
Residential transactions for 2020
Despite a rush of homebuyers coming to the market after Alert Level 4 ended, subsequent residential transactions could not make up for the dismal second quarter (April to June). The annual number of sales registered in the deeds office was reported to be 241 570 in 2020 compared to 340 516 in 2019. However, LexisNexis has been seeing a promising spike in electronic rates clearance transactions as lockdown restrictions eased and into 2021, with up to 2000 requests coming through daily through its Lexis Rates Clearance solution.
Economic drivers and trends
The South African economy has been under pressure for the last few years with GDP for 2020 expected to be 5,8% smaller than at the end of 2019. The pandemic merely amplified a struggling economy characterised by significant unemployment, heightened job insecurity, rising government debt, and low GDP growth all of which conspired to depress consumer sentiment.
However increased affordability is being driven by:
Interest Rates: The lowest interest rates in 50 years following the rate-cutting spree by the Reserve Bank is currently the single biggest driver in releasing pent up demand resulting in mortgage applications approaching multi-year highs.
Attractive prices: National house price inflation, despite being below CPI, remains positive and will top 2% for 2020.
Lower transfer duties: A slight contributor but nonetheless, the threshold for transfer duty was raised from R900 000 to R1 000 000 in March in an attempt to “support the property market.”
Younger buyers: Competition among lenders has resulted in higher Loans to Value (LTV) ratios, allowing more first-time buyers to enter the market, as the move from renting to owning property, unfortunately depressing the rental market.
Correctly priced houses continue to sell, with an average discount of 11% from their listing price, even while sales remain slow.
Upscaling: Buyers are considering properties they could not afford earlier as a result of the above. 
Government’s attempts to reignite economy could boost sentiment and employment.
However, it is possible that a W rather than a V shaped recovery could also happen.
Another dip before an upswing could also happen as a result of:
- Job losses spreading to white-collar occupations;
- Pre-existing weaknesses in consumer and corporate fundamentals exerting themselves;
- Rising vacancy rates causing landlords to release housing stock and rising emigration induced sales, both leading to an oversupply of properties;
- Pressure on income streams such as dividend and rental income;
- An extended Level 3 lockdown in response to the second Covid-19 wave; and
- Expropriation without compensation legislation dampening sentiment,
all giving rise to what has been termed a W rather than a V shaped recovery, in short, an uncertain outlook. 
While the outlook for the residential property sector remains uncertain, those in the property field can ensure they are positioned to handle all eventualities as they endeavour to weather the Covid-19 storm.
Click here to find out about secure property platforms available to ensure a better 2021 than 2020.