Forecasting the next 5-10 years in the property market: Unveiling opportunities and challenges.

The South African property market is constantly evolving, and it's difficult to predict the future with certainty. However, there are some trends and factors that could shape the property market in the next 5-10 years, along with some opportunities and challenges that may arise.

Berry Everitt, CEO of the Chas Everitt International property group gives a breakdown of some of the trends and factors that could shape the property market in the next 5-10 years.

Urbanisation:

The trend of urbanization is expected to continue, with more people moving to cities in search of employment opportunities and better living standards. This could lead to increased demand for urban properties, particularly in well-planned and accessible locations.

Technological advancements:

The rise of technology is expected to have a significant impact on the property market, particularly in the areas of property management and home automation. The demand for smart homes is likely to increase, and landlords and property managers may need to adapt to new technologies to remain competitive.

Sustainability:

The importance of sustainability and eco-friendliness is expected to increase, with more emphasis on green buildings and energy-efficient homes. This could lead to new investment opportunities in the renewable energy and green building sectors.

Demographic shifts:

As the population ages, there could be a shift in demand towards properties that cater to senior citizens. Similarly, the rise of young professionals and millennials could create a demand for affordable, high-density living options.

Economic factors:

The South African economy is likely to continue to face challenges, which could impact the property market. Factors such as interest rates, inflation, and political instability could impact property prices and demand.

"To be successful, investors and property professionals will need to stay informed about trends and developments, and be adaptable to changing market conditions," says Everitt.

Antonie Goosen, principal and founder of Meridian Realty, says in the next 5 to 10 years, property investors must focus on the market segments that will become the largest segments of buyers and potentially the most lucrative.

"These are Millennials (born between 1981 and 1996) and Generation Z (Born between 1997 and 2012). Whilst Millennials might be struggling to enter the market due to high inflation and interest rates at present in 5 to 10 years their earning potential would have increased significantly. Millennials will continue to grow in the market and Generation Z will start to enter the market in greater numbers.

"To appeal to these future buyers, property sellers, investors and developers must provide work from home facilities, fast internet, lifestyle appeal and off grid solutions. According to Property24 Trends buyers aged 18 - 35 make up 27.7% of the total market nationally and Buyers aged 36 - 49 make up 36.6% of the total market. Currently Millennials range from age 27 to 42 years old, spanning both these significant segments. Many Generation Zs are still emerging to be of buying age - ranging from 11 years old to 26 years old in 2023," says Goosen.

Digital advancements are reshaping the real estate sector at such a pace that within 10 short years every aspect of the property market - from physical spaces to ownership options - will have undergone an irrevocable change.

"Technology is already intrinsic to people's lifestyle, career and investment choices," says High Street Auctions Director Greg Dart. "From connectivity that's literally opened a world of locations for remote working individuals to the macro-economic potential of smart cities, real estate has now crossed the digital event horizon and there's no going back."

Dart says within 10 years most living spaces will be different.

Smart Homes

Global research company Future Market Insights forecasts that by the end of this year, the smart home services market will be worth US$ 7.5 billion, rising to US$ 31.41 billion by 2033.

Its research indicates that sale of smart home services will record a compound annual growth rate of 15.4% over the next decade, prompted in part by lifestyle convenience, but also by increasing demand for advanced security features including Artificial Intelligence (AI) assisted monitoring.

Dart says the latter part of the decade is likely to see smart homes transcending the luxury property bracket to become a residential development norm, "but like everything in life, you'll get what you pay for".

"Standard smart structures will centrally control systems like security, appliances, energy consumption and climate, but AI advances will offer home owners an unimaginable array of add-ons - limited not by imagination, but only by price."

Tech trend forecasters already have an extensive list that includes:

• Immersive Virtual Reality systems that replace first-generation metaverse avatars with life-sized remote projections of users that others will perceive as a three-dimensional presence.
• Automation processes that perform 39% of housework and domestic chores. According to the Oxford University study, task efficiencies will vary from around 28% for care activities (like helping children with homework) to reducing by 60% the time spent on grocery shopping.

Sustainability

Eskom's future and its potential to decimate the economy remain burning issues for South Africans, but energy efficiency is also a global real estate concern. Dart says the Russia-Ukraine war starkly demonstrated international energy vulnerabilities last year.

"Data released in November by, among others, Energie-Control Austria and the Hungarian Energy and Public Utility Regulatory Authority, revealed that European household energy costs nearly doubled in 2022. Household gas bills soared by 111% and electricity bills by 69%, putting the combined average price at 90% higher than October 2021.

"This doesn't mean all future homes should be completely off the grid, though, if we heed the experts and implement plans to decentralise power generation as the City of Cape Town is doing.

"The power decentralisation model describes a system of small community-based electricity generators and storage capacitors that provide continuous power whether or not the main grid is up. Decentralised green energy initiatives have the potential to democratise global power supplies, lower carbon emissions, sustain economic growth and cut costs for consumers."

Dart says within a decade, sustainability will also dictate new building designs and construction materials.

"Planning permission for new builds will depend in part on energy efficient designs that incorporate eco-friendly building materials like bamboo, precast concrete slabs and recycled plastic that can become anything from a PVC window frame to a carpet. Developments that don't meet these criteria won't get planning approval."

Buying and Selling Property

Dart says while technology will substantially transform our built environment over the next decade, the most dramatic changes will be to the nature and scope of property transactions themselves.

"Immersive VR property tours will be a win-win. Sellers lose the stress of accommodating hordes of strangers traipsing through their homes, and prospective buyers can digitally tour a dozen properties in the time it currently takes to view one. Shortlisting will be faster, resulting in quicker sales."

Dart says buyers' real estate investment options are also growing.

"One avenue gaining momentum is real estate tokenisation, which showed proof of concept more than four years ago when US$18 million was raised by selling just less than a fifth of the St. Regis Aspen resort hotel on the blockchain.

"Tokenisation's value lies in the integration of blockchain technology into real estate, triggering a complete overhaul of the domain that has created opportunities for smaller investors to buy into high value assets."

Dart says another potentially lucrative investment avenue will grow from cities releasing sky rights: "Greenfields land in established metros is scarce, which means the only development direction is up. The concept of sky rights isn't new, but rapid urbanisation is pushing cities to create space and selling sky rights is among their best options."

The biggest challenge facing the property sector, though, is converting sellers to cryptocurrency sales.

"Crypto is already a growing force in the international real estate market, so local education is going to be critical in the next couple of years to avoid losing sales."

Nadia Aucamp, Broker/Manager of RE/MAX All Stars, says the property market is definitely stabilising at the moment with the market reaching the peak of the interest rate hike cycle.

"Should history repeat itself there should be a major growth in the property market in the next 5-10 year. Property will always remain a good investment," says Aucamp.