The Agency Year End Report - A Year Like No Other
Category Industry News
What a difference a year makes.
Last year this time we were celebrating our first year of existence and as we looked back on a challenging year in 2019, our forecast for 2020 was one of cautious optimism... who could possibly have anticipated the year that was to be?
The Covid-19 pandemic has undoubtedly left an indelible mark on us all in 2020 and it would be impossible to look back on this year without making mention of its undeniable impact.
As South Africa locked down towards the end of March, we all were forced into survival mode, then later, we needed to adapt to a new world. Industries across the globe looked to either re-invent themselves entirely or attempted to shift their business model to cope with the 'new' normal.
The real estate industry, for example, was not able to operate for a period of two months due to government regulations. It was a challenging period, no doubt, but while industries across a variety of sectors took stock and considered how they could pivot, for The Agency Property Group, it did provide further affirmation that our model of business was the correct one.
We have always understood the need for a Real Estate agency to operate in a remote, mobile and fluid way, and while traditional agencies were forced to reconsider how they conduct their businesses in the Covid-19 reality, by implementing remote working and more fluid work hours, The Agency was borne out of the necessity to bring change to the Real Estate industry.
In short, it did not need a pandemic to bring about change.
A mid-year bounce-back
Covid-aside, looking at the real estate market on the Atlantic Seaboard this year, it hasn't been all bad. If you look at the number of sales compared to 2019, there has been a drop-off. In sectional titles there has been a 33% drop-off, while freehold is also about a 24% drop, but then this was to be expected with the lockdown grinding everything to a halt for two months.
Then in June/July we saw a nice bounce back with a lot of pent-up demand and local governance contributing to a positive market. A surplus of stock and the South African Reserve Bank's decision to cut the country's rates significantly certainly made it more attractive for prospective buyers to dip their toes into the market over that period.
The Reserve Bank cut a total 300 points, lowering the repo rate to 3.5% and the prime lending rate to 7%. The cut in July reduced prime and the base home loan rate to a further historic low of 7.0%.
But despite this positive bounce back, it is certainly not surprising to see an annual drop in sales with a global pandemic wreaking havoc on the industry.
According to CMA Info, residential sales of Freehold properties on the Atlantic Seaboard* dropped approximately 24% while the median selling price dropped 2.71% to R8 075 000.00 from 2019.
*Specifically the following suburbs - Camps Bay, Clifton, Bantry Bay, Fresnaye, Sea Point, Three Anchor Bay, Green Point, Mouille Point, De Waterkant and The Waterfront.
Likewise, residential sales of Sectional Title properties on the Atlantic Seaboard* dropped approximately 33% while the median selling price dropped 2.24% from 2019.
*Specifically the following suburbs - Camps Bay, Clifton, Bantry Bay, Fresnaye, Sea Point, Three Anchor Bay, Green Point, Mouille Point, De Waterkant and The Waterfront.
Even before Covid hit, we were in a buyer's market, with the prices coming down since 2017. If we look at the stats, you can see a decrease through the years since 2017 on the Atlantic Seaboard. There was a lot of stock on the market pre-Covid, so it's interesting to note that there was only a 2.24% to 2.71% drop on both sectional title and freehold, which shows that even with this massive crisis and complete lack of certainty, it has not dropped as much as could have been expected.
According to Propstats (as of 7 December 2020), the average selling price of properties on the Atlantic Seaboard was approximately 17.8% below the original listing price. This is an interesting stat when taken into account with the above statistic of property values only dropping 2% and the fact that average days on the market have stayed relatively consistent with last year (Freehold - 121 days and Sectional Title - 93 days). Sellers still seem to be trying to hold onto 2016/17 prices but eventually sell at the correct market-related price in due course. And, there continues to be a substantial appetite for properties that are priced correctly. Sellers should be engaging the services of their trusted property advisors who can expertly advise on pricing and marketing their property correctly to achieve the highest possible price in the shortest time.
What next?
It is very difficult - impossible even - to predict what happens next, but it is positive to see that the fallout has not been as dire as some thought it would be. If we look at the historical recession of 2008/09, which was remarkably similar to what we went through in 2018/19, it did start to shift up again in 2010...
We could be at the bottom of the downturn and it may possibly be about to move up again. So while we don't have a crystal ball at hand and won't be making any bold predictions, the signs are certainly not all bad.
A further positive, in terms of the Atlantic Seaboard, as you can see in the graph below, is that Sectional Title properties in the area, when compared to the rest of the City of Cape Town, is holding significantly more value, meaning it is still a particularly good investment for potential buyers.
Another positive year for The Agency
This was certainly not an easy year for anybody, but as an agency, we have been extremely proud with how we managed to navigate it. We have had a great year and the model has proved itself in 'moving real estate forward' and people are starting to see the value of how our model works.
We are certainly very happy with it and we continue to grow, moving into the Southern Suburbs market with great success this year, and we will definitely be looking to expand in that area and beyond in 2021.
Moving forward, we are in uncharted waters - as the rest of the world is - but if 2020 has shown us anything, it is that we need to adapt to what is in front of us, innovate and ensure we remain sustainable. No doubt, it has been a difficult year but we are looking ahead with positivity and will be sure to shift our thinking to deal with whatever new challenges come our way in 2021.
We wanted to take this time to thank every one of our clients, friends and partners who have been involved with us along the way. We cannot emphasise enough how important these relationships are to us and it is one of the reasons we chose to establish our unique boutique-style agency, so that we can really ensure we keep our business flexible and personable.
Author: The Agency Property Group
