COVID 19 Tempts South African buyers away from dense city living

The rapid urbanisation model that’s been guiding 21st century global macro socio-economic development has in a few short months been turned on its head by COVID-19 to such an extent that business and real estate experts believe the recent decentralisation trend could be permanent.

The migration movement in South Africa is mirroring countries like the UK and Australia with the number of buyers interested in smaller regional towns and rural properties sharply increasing in recent months. This is in contrast to real estate trends around major metropoles such as New York where searches for suburban homes have spiked since the pandemic began.

Currently, 55% of the world’s population lives in cities, but densification forecasting in recent years has put that figure closer to 70% by 2050 across both developed and developing nations.

It’s a forecast that’s probably going to need revision, according to real estate industry veteran Joff van Reenen, Lead Auctioneer and Director of High Street Auctions, who believes the societal and business changes brought about by the pandemic will be far-reaching and permanent.

“This isn’t a transient change; we’ve become accustomed to working, living, and socialising differently. It’s standard now to have a Zoom meeting even if your client is just down the road; nobody feels slighted because it’s the norm and it’s going to stay that way. 

“If the conveniences that urbanites prize like galleries, theatres, and bars become places that are dangerous because they’re crowded, it’s not unreasonable for them to start questioning the appeal of density living and the higher costs associated with prime areas in major cities.

“In the past three months, we’ve seen those questions reflected in hard numbers; the increase in traffic on our website and the number of inquiries about rural homes we’re auctioning.”

Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty says: “We were already seeing this trend in South Africa pre-COVID, with a growing number of people moving away from main metros due to affordability, traffic congestion, crime, and quality of life but we expect it to accelerate in the wake of the pandemic.

“People’s desire for more space is understandable considering the practical implications of lockdown and self-isolation which can be extremely confining in a dense urban environment where homes tend to be smaller and public areas and amenities more crowded.”

Van Reenen, who has conducted auctions across four continents, says the company has also noted an unprecedented level of qualified bidder interest in rural residential properties offered in High Street’s virtual auctions that started at the beginning of the lockdown.

“A couple of the luxury bush-type lodges were actually purchased sight-unseen, purely on the strength of 3D virtual tours on our website. They’re all city residents who’ve told us they’re either looking for a permanent move or for a second home to which to escape with their families.”

These observations are echoed by realtors quoted in the Wall Street Journal last month. According to the publication: “The pandemic has also sparked a renewed interest in secondary residences. In highest demand are rural areas within a short drive of large cities—such as the Atlantic coast in France, the sparsely populated state of Brandenburg that surrounds Berlin, or Connecticut.” 

People who can’t entirely relocate to rural centres are turning to suburbia in far greater numbers than we have seen in many years, especially those who live in the larger metros.

“Shark Tank” investor and CEO and founder of cybersecurity firm Herjavec Group, Robert Herjavec believes that we are about to see “one of the greatest moves to the suburbs from urban areas since the 1950s or the ’60s” and that the trend will persist well beyond the peak of the Covid-19 outbreak. 

“Everybody wants to leave large urban communities and move out into the suburbs,” he told CNBC’s ‘Squawk Alley’, “I recently moved out of Los Angeles into a suburban area, and I can tell you on a very personal level, my area is on fire.”

In New York, data from Miller Samuel and Douglas Elliman revealed that apartment vacancy in the city in June hit a record high of 3.67%. More than 10,000 apartments listed on the market that month, an 85% increase compared with June of last year.

And in the UK, user stats from major property websites suggest that the major British cities could see a mass exodus of home buyers after lockdown, with Rightmove reporting that searches by Londoners for homes outside the capital were up to 51% compared to 42% this time last year.

“In addition to shifting residential priorities, we also have to consider the changing nature of the workplace,” says Geffen, “because it’s very likely that a number of the temporary lockdown measures will become the new ‘normal’, especially working remotely.

“A recent Gartner poll revealed that 48% of employees are likely to work remotely at least part of the time after the pandemic versus 30% before COVID-19, and many will regard a commute to the city occasionally as a minor inconvenience in exchange for a more comfortable lifestyle.”

This isn’t unique to South Africa, remarks Geffen. In Japan, 36% of young people say they aspire to change their careers and move further out of the cities, according to a survey in the Chinese news outlet Caixin. The main motivation for changing jobs is to avoid being infected with coronavirus in overcrowded megacities like Tokyo.

Likewise, in France, 38% of potential home buyers widened their searches further from big cities as they sought gardens and an extra room for remote working during the pandemic, according to a survey mid-May by French real-estate portal SeLoger.

“Decentralisation won’t be a passing fad,” Van Reenen concludes. “The world as we knew it has changed and the way we’ll live future is going to reflect that.”

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