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The knock-on effect of Covid-19 on property

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As President Cyril Ramaphosa declared a national state of disaster on Sunday night and announced, among others, sturdy travel bans, the property industry - already in a tough corner - gulped hard. By Vivian Warby

Ramaphosa’s measures came swiftly and almost unexpectedly to many South Africans who were only starting to catch on to the impact of the coronavirus which has already taken 6 000 lives in its wake overseas.

The property industry lauded the president’s swift action to halt the fast spread of the virus but there was a stark realisation the actions would not be without a dramatic and potentially lasting impact on the already ailing economy which would, in turn, have a knock-on effect on property.

One of the areas the property market would be hit would be in the R10 million-plus market as “many foreign buyers or investors will be staying away until they understand how their finances are going to be affected”, says Bill Rawson, chairman of the Rawson Property Group.

He says there has been an increased number of enquiries for rentals at higher values. “I think that those who still need accommodation won’t just stop – they will continue to buy and it may even turn into a stronger buyer’s market than before.”

Meanwhile, Russell Pearson, CEO of Re/Max Address in KZN says the announcement would certainly affect tourism in the short-term and “this could well stall the SA economy further and this might have a knock-on effect on the property market throughout the country over time”. 

He believes that, while necessary, limiting gatherings to a maximum of 100 people “will further dent the economy and will definitely auger slow growth and perhaps further increase unemployment”. 

“So, whilst property ownership has always been the cornerstone of a sound economy, real price value increases will remain in-check whilst we go through this current global crisis,” said Pearson.

Rampahose said that in the last few weeks of Covid-19, the country had seen a dramatic decline in economic activity in its major trading partners, a sudden drop in international tourism and severe instability across all global markets.

“The anticipated effects of the decline in exports and tourist arrivals will be exacerbated by both an increase in infections and the measures we are required to take to contain the spread of the disease. 

“This will have a potentially severe impact on production, the viability of businesses, job retention and job creation.

“Cabinet is therefore in the process of finalising a comprehensive package of interventions to mitigate the expected impact of Covid-19 on our economy.”

“This package, which will consist of various fiscal and other measures, will be concluded following consultation with business, labour and other relevant institutions.”

Meanwhile, the President said the virus has provided an opportunity for South Africans to work as a united nation and to help each other. “I have great trust our people will respond positively to this call for common action… It is a grave emergency but we act now decisively and together – we will overcome it… United we are strong”.

He said the current circumstances “require extraordinary measures to curb the spread of infections. 

Countries that have heeded the call to implement these radical measures, have fared much better than those than do not”. And the property industry agrees.

Other measures he announced include no gatherings with more than 100 people. and that schools will be closed from Wednesday till after Easter. 

He asked SA to act as a united nation.  “It is clear that this disease will be extremely disruptive.

“Our priority must be to safeguard the health and well-being of all South Africans, to minimise the number of infections and to ensure all those infected get proper treatment. While we are battling a contagious virus, perhaps the greatest dangers to our country at this time are fear and ignorance.”

He called on South Africans to realise that the country had things under control and had the best heads working together to curb the spread of the disease.

Earlier in the week Org Geldenhuys, MD of Abacus Divisions, a commercial property marketing and development company, says the virus could have a devastating effect on the property markets as a secondary result of the impact it will have on the world economy, describing it as a Black Swan event.

He believes from tourism-related property the knock-on effects will be felt in the retail industry with shopping centres and retail outlets becoming deserted as consumers start to favour online shopping and home delivery services above going shopping and risking infection.

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