House prices could drop up to 20% as lockdown grinds property sector to a halt | Simply Online


House prices could drop up to 20% as lockdown grinds property sector to a halt


If you look at the industries that are under pressure, we know newspapers are having a rough time, airlines, tourism. One that doesn’t immediately come to mind is the real estate industry or in particular people who facilitate the buying and selling of houses and Bryan Biehler is the managing director of Huizemark. You must be feeling like many of the other worst affected industries in this country – houses are sold through show days, agents have to get out and talk with buyers and sellers. But maybe it’s not all that bad. What ‘s actually going on in your sector?

The real estate industry basically came to a standstill. On 26 March we all went into lockdown with everybody else. No buyers could be taken to houses and sellers couldn’t sell houses, so the industry just went into a freeze frame. As an industry we have tried to work digitally – stay in touch and keep the relationship with all the clients. We have done a few interesting technological advancements. From an industry point of view nothing will ever be the same again prior to lockdown and we are going to have a new way of thinking, a new way of acting.

How many agents are there when you say it has freezed, so how many people’s incomes have been frozen?

As an actual agency, it’s probably about 50,000. Along the value chain there are hundreds of thousands, as you talk about the bond originators, conveyancers, removal companies, electricians, plumbers – everybody does a certification. So the impact economically is huge. We’re also a fairly big contributor to GDP and that all adds up at the end of the day.

When you look at it in a broader perspective, what about the Deeds Office? Because presumably you get a buyer and the seller together and we’ll go into more detail on how you try to overcome the issues of physicality. But is the Deeds Office at least open. Are they processing transactions?

No, unfortunately the Deeds Office is closed like everybody else, but all the transactions in the Deeds Office have now essentially been rejected because their rates clearance certificates have expired. Your rates clearance certificate goes hand in hand with the transfer documents, and those expiry dates would have occurred during the lockdown period, which means that either one has to reapply for a new rates clearance certificate at huge cost or as we, as an industry has called for an extension of five weeks on the expiry dates to allow for the continuation and the backlog of outstanding deeds. Buyers and sellers are in limbo pending some sort of conclusion.

Sounds like a tough time that you guys are having, what are you doing to overcome it because surely some people still move, go overseas and sell their house and some are forced sellers to put money into their businesses?

We have done a whole lot of this digital and electronics advancements in the industry. So, there are still people buying and the way they’re buying is either they’ve seen the property previously, or they’ve spoken to an agent, or they’ve perhaps done a virtual show day, where through the agent the seller has taken a video or photos so that the buyer can get a sense of what it’s all about. If the buyer is keen to make a commitment, they would sign an offer to purchase subject to a viewing within 10 days after lockdown has been lifted. That means a contract comes into place but it’s suspensive on that viewing, and that viewing will eventually become a due diligence, where the buyer will not only view the property but also compare and evaluate the property in comparison with the property disclosure document. The pending purchase remains an option for the buyer and seller until the suspensive conditions are fulfilled. Until then the seller is quite entitled to continue marketing that property.

Until that happens, until the lockdown is over you just can’t transact?

We just can’t transact at the moment, no. We can do a few listings, where sellers take the photographs and we can publish, buts it’s a bit removed as this is a people orientated business.

What’s going to happen afterwards? When we were in the market to purchase a home we went to different places with our agent. We went into different people’s homes. With the low-touch economy we’re going into where everyone’s scared of picking up a coronavirus or some other nastiness, that might have to change. Do you think the whole industry will be different going forward?

Absolutely. The industry is going to be very different. Agents will have to develop new skill sets. They’re going to have to be able to verify the buyer properly not just from a willingness to be able to buy but also that they’re able to buy so they’re going to be financially prequalified. The seller will be more cautious about who they allow into their property. So social distancing will become a thing of the future. A lot will be done electronically and only the necessities done face to face. So there’ll be a slightly more skilled agent at verifying parties to make sure that they are serious about the transaction. There’ll be more pressure on prices, the law of supply and demand. There will be more properties on the market and a lot less buyers because of the economic situation.

What we do know is the economy is projected to contract this year. It’s just a matter of how big with property prices following economic performance, how significant a decline in prices are you anticipating?

We’re anticipating anything from 10-20% reduction in pricing as was pre-Covid-19. The demand is going to be very tempered based on the career or the industry of the job that the buyer has. Those in entertainment or tourism are going to battle to have the backing of the banks, from the bond perspective. Then I think there’ll be a change in lifestyle, so people will be looking at a minimalistic approach and less is more, so there’ll be more demand for complex style living, high density type living, secure estates. Certainly those will be the prime properties going forward.

Extraordinary changes that we’ve seen across our lives and in certain industries. But what are you doing as a property sector to try and reopen?

We have made a submission firstly on behalf of Rebosa, which is the real estate business owners of South Africa, and the National Property Practitioners Council, which is all the agents in this country. We made a submission which unfortunately we didn’t get a response to. We will make sure that we try and do another submission. We are very cognisant of the concerns of the virus and we’ll take all the necessary precautions and issue protocols in which to operate safely and to prevent any further spread.

Have you seen what’s happened in other parts of the world? Is there anything we can learn from?

In other parts of the world surprisingly real estate can operate at a level 4, we can only operate around level 2. Our submission is to up our level and be able to operate now, such as the financial institutions and their attorneys.

So I guess you need to have the Deeds Office back on stream before any of that can make any sense?

The Deeds Office is meant to be opening, but imminently over the next couple of days. We need to get clarity on whether it’s opening to the public or whether they’re going to be dealing with a backlog, but we need that to happen so that some income can flow through the system and that those buyers and sellers can actually move on. There are a lot of buyers and sellers who are two months behind in moving. There is going to be huge pressure point on removal companies eventually and to get the balance right.

Bryan when we started this interview you said there were about 50,000 estate agents in South Africa. Do you think there are going to be 50,000 estate agents in a few years time or are there going to be casualties?

I think the real estate industry is going to take a big knock in terms of casualties and again we’re expecting perhaps 30% of the industry to fall by the wayside. They literally cannot carry themselves financially during this lockdown period. They’ve got rents, salaries to pay, they just can’t do it. Unfortunately the economy was already in a recession and it will be difficult to financially survive the Covid-19 situation.

4th May 2020 by Vanessa Marks