Page 35 - Silver Lakes May 2021

PROPERTY

Lightstone, a leading provider
of comprehensive data,
analytics and systems in the
property industry, suggests
scenarios that could see house
prices rise by between 2.1%
and 5.2% in 2021.

HOUSE PRICE SCENARIOS DEFY

COVID-19 ADVERSITY

esidential property prices defied the economic lockdown was assessed. “2020 has thrown some
COVID-19 conventional wisdom Economic forecasts were hurriedly interesting curve balls our
Rin 2020, and house price inflation adjusted downwards and even the most
ended close to 3% at the end of the year, optimistic economists were predicting way as unprecedented
some 2.7% above Lightstone’s forecast an economic decline of around 10%. “As circumstances have kept
made at the beginning of 2020 and it happened, this was not far from the us analysts on our toes. In
6% above the highest post COVID-19 -7.3% expected for 2020, however house saying this however, it has
prediction. Lightstone anticipates prices did not follow economic growth as
residential sales will continue to hold expected,” says de Kock. been interesting to see
their own, and house price inflation is how a year marred with
anticipated to be anything between 2.1% SO WHY DID HOUSE PRICES TAKE A such negative sentiments
and 4%, with a potential upside in the DIFFERENT PATH?
luxury sector. Lightstone, along with other economic can open new doors for the
commentators, did not anticipate the housing market,”
Before COVID-19 struck, Lightstone resilience of the house price market, - concludes de Kock.
forecasted that annual house growth with even the most optimistic scenarios
was going to drop from 1.4% at the forecasting negative house price growth.
end of 2019 to about 0.3% at the end of
2020. “We took this view because of low Predicting house prices during normal drop in GDP growth. At the lowest point
economic growth forecasts of about 1% times can be tricky, but predictions of the 2008 recession, the South African
for 2020 and the generally weak housing amid a once in a lifetime catastrophic economy shrunk by -1.5% while house
market conditions that were expected event became near impossible. During prices shrunk by -5.4%. Using a simple
to continue from 2019 into 2020,” says the last couple of years, the economic rule of thumb, it seems safe to predict
Paul-Roux de Kock, Analytics Director for environment in South Africa did not that if the economy was to decline by
Lightstone. change that much from one year to the 10% in 2020, house prices would drop by
next, and typically house prices followed the same percentage or more.”
As news of the economic impact of the that same trend. A ‘Black Swan event’,
coronavirus outbreak filtered through which lead to the largest annual decline 2020’S SAFETY NET
international media towards the end of in economic growth since the Reserve Personal asset markets tend to respond
2019, its true impact was only really felt in Bank started recording statistics, makes differently from other basic commodity
Europe in the first quarter of 2020, and in looking ahead even more difficult. markets through a short-term economic
South Africa in the second quarter. crisis. In most commodity markets an
De Kock says, “To try and make sense of oversupply would, for example, quickly
Apprehension turned to panic in many the impact of the economic lockdown, lead to a decrease in the price of the
quarters as COVID-19 worked its way we looked at the financial crisis of 2008 commodity like we have seen with the oil
into South Africa and the impact of where we also experienced a sudden
price during the pandemic. This is because

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