The lockdown diaries, #12: Are you ready for a stop-start real estate economy?
40 Days ago: Flatten the curve, stay at home!
Now: Open the economy!
Do we experience a false sense of security or simply lost our compassion for saving the lives of others? If you or someone close to you is a high risk factor, the picture suddenly changes. Are the lock-down regulations working so well that we are under the illusion that we over reacted?
South Africa’s fast reaction time has been applauded over the world, but with a severe impact on the economy, people want out. The very strict lockdown rules have business owners across various industries up in arms. In South Africa with its high gap between poverty and wealth, hunger is replacing the virus as existential fear. A forecast of 1.6 million jobs to be shed in 2020 paints a really grim picture at the moment. That said, when one door closes, another opens.
Impact on the real estate sector
In South Africa, commercial real estate agents can only operate under level 3 and residential agents under level 2 of lock-down. The impact on the real estate sector is severe to say the least and several organisations including our company has submitted pleas to government to ease certain restrictions to help home owners and agents.
Estate agency owners are forced to make hard decisions. Nearly all businesses are paying a price, with the restaurant and tourism industries probably the most severely affected if you look at the regulations. With most agents being commission earners, few can claim UIF benefits from the government. Once they are able to operate it, there will be a delay before any new sales are concluded and registered with the Deeds office.
How are you using your time now?
A few business owners I spoke to recently are using this time to retool and are optimistic that things will get better slowly. They realise that they need to adapt to this new way of doing business. A lot of agents are attending online training webinars and cleaning up contact databases. I’ve even noticed online deals being concluded although with suspensive viewing conditions attached.
We’ve probably had the busiest month in recent years with loads of agents revamping their websites. Agents are also reaching out to their local communities and these deeds are not going unnoticed. Compassion is the keyword here, and if you are continuing your hard sale tactics from the pre-COVID-19 era, expect a bumpy road ahead.
All over the world, governments are trying different approaches with mixed results and views, but until a vaccine is found, it looks like we could be in for a start-stop type of economy for the foreseeable future.
Just have a look at the following scenarios. In the South African context we could be in an out of lockdown levels as illustrated in scenario 1 below (I’ve inserted level 2/5 for pure illustrative purposes):
This is also reflected by the view of the SA government below, they will need to adjust lock-down levels dynamically with their risk-adjusted approach:
Other factors to consider
You need to factor in Deeds offices and municipalities shutting down at any point in time as a result of Covid-19-related incidents, this is already happening and can delay transfers or clearance certificates.
A critical point to consider is that everyone in your office may be forced under self-quarantine for two weeks if a risk of exposure to COVID-19 has been identified. For example, one of your agents has been in contact with a buyer or seller who contracted COVID-19 and has since visited the office. They would need to disclose this to the office under the current regulations.
In light of the regulation which provides that “any person who intentionally exposes another person to COVID-19 may be prosecuted for an offence, including assault, attempted murder or murder” this should be taken seriously.
Are you prepared for a disruptive stop-start real estate economy?
With the potential above scenario in mind, will you be able to operate with real estate activities thrown in and out of different lockdown levels? For example, property viewings possible in level 2 but if they move it up to level 3, no viewings for weeks. Ideally you should plan and prepare to cram in what you can legally do in level 2, and under level 3, fall back to your online only activities that you are doing right now.
Can your office operate virtually and are you empowering your agents with all the right online tools to work from home right now and in future lockdown scenarios?
The virus has accelerated the need for a more virtual real estate shopping experience.
New habits will form in real estate. The virtual tools home shoppers need for safety today will become their expectations for convenience tomorrow.
Virtual tours will be one of those safe investments you can look at. Just have a look at what Zillow is saying in a recent shareholder letter:
There are many other ways real estate will be taken more virtual. Plan ahead with this potential start-stop scenario in mind. The more you can do virtually, and the more you can reduce your operational expenses to keep your cashflow going in future lockdown scenarios, the better your outlook will be.
It’s now more important than ever, to be more efficient with your time, and only work with serious clients.