Conditions in the national residential property market are beginning to stabilise despite tepid economic growth, with the Cape Town CBD remaining one of the country’s growth nodes.
This is the view of Dr Andrew Golding, who recently presented the Pam Golding Properties Annual Residential Property Report, detailing the state of the national housing market.
Dr Golding says that while it is unlikely that the housing market will enter “another fully-fledged recovery” in the current economic climate, it remains resilient.
Cape Town remains the top-performing metro, followed by the other coastal metros of Nelson Mandela Bay and eThekwini.
The CBD is a well-located “growth node”, which is experiencing a proliferation of mixed-use developments and elevated levels of activity as it meets the demand for a secure, live-work-play lifestyle from a growing number of South Africans across a wide range of income bands and age categories.
“The property market is not a case of one-size-fits-all, with sales activity in different regions and with higher demand and activity in sought-after centres and conveniently located nodes around the country … including Cape Town Central.”
FNB reports the demand for investment properties has also been particularly strong in the coastal metro markets, notably in Cape Town, with investment properties accounting for 10.6% of all properties sold during the second quarter of 2019.
According to Lightstone, although total unit sales had slumped in the first quarter of 2019 – probably due to load-shedding and pre-election jitters – they had since “rebounded strongly”.
Dr Golding says: "Of interest is the shift from freehold to sectional title, which is evident in the national sales." This demand for sectional title units has kept the CBD residential market relatively buoyant. According to The State of Cape Town Central City Report 2018 – A year in review, published by the CCID, sectional title sales in the Central City increased from 316 units in 2017 to 361 units in 2018.
Since the report was published, seven new developments worth R1.193 billion, which comprise hotels, apartments and mixed-use developments, have been identified, including two residential units on the Foreshore, namely The Duke, worth R210 million, and Fleetway House (value TBA).
REAL HOUSE PRICE INFLATION
Real house price inflation remains positive in the Western Cape, “which is currently enjoying the seventh consecutive year of positive real house price inflation”.
“The Western Cape housing market has enjoyed real growth in house prices since late 2013, when it began diverging from the rest of the South African market. While the rest of the national housing market was experiencing a downturn, the Cape benefited from the influx of older, more affluent homeowners as the semigration trend intensified,” Dr Golding says.
However, from late 2017 until early 2019, the province’s housing market – while still outperforming the other major regional markets – experienced slowing house price inflation, bringing it back in line with the rest of the country.
Recently there appears to be a “modest turning point” in the Cape market, Dr Golding notes, with house price inflation rising from a recent low of 4.97% in May 2019 to 5.12% in September 2019.
The Duke
RENTAL MARKET
While Western Cape remains the most expensive province for renters, rental growth in the province has continued to slow down during the first half of the year. In the second quarter, rental growth in the Western Cape was 2.51% compared with 2.96% in the first quarter. By comparison, rental growth in KwaZulu-Natal was 5.43% in the first quarter, up from 4.62% in the first quarter.
Dr Golding says the City Bowl, particularly the Foreshore precinct, remained a popular rental area in the Western Cape, along with the Waterfront, Southern Suburbs and Atlantic Seaboard “for its appealing lifestyle and easy access to work”.
“We are also seeing an increase in demand for apartments to rent in secure developments, especially in the City Bowl, Foreshore, Southern Suburbs, Observatory and surrounding areas, where rentals vary from R7 800 per month for a bachelor unit and two bedrooms up to R20 000 plus.
SECTIONAL TITLE UNITS
There has been an interesting shift title, which is evident in the national sales, ”Dr Golding says there is an ongoing demand for sectional title homes, more compact homes with lower maintenance and lower operating costs, and homes in convenient locations close to schools, the workplace and all amenities, allowing homeowners and tenants to avoid heavy traffic congestion.
“This is particularly evident in key hubs or growth nodes such as … Cape Town Central,” he says.
More single people are buying property which is also driving the demand for sectional title living. Apart from the younger generation, sectional title buyers include professionals who travel frequently, downscalers and retirees who travel overseas to visit family.
He says the recovery of the housing market is likely to be modest with the outlook for 2020 moderately better than 2019.
Other key trends of the report are:
- Stellenbosch and Somerset West are among the other “growth nodes” in the country.
- Of all the homes sold, 13.5% were in estates, and of all the new homes sold, almost 10% were in estates.
- Downscaling remains a key theme across all price bands for selling a property, with 23% of all sellers offering that as a reason. Financial pressure is the second most popular reason.
- The semigration trend will continue to the coast, particularly the Garden Route and KZN and the Western Cape.
- Estate living remains sought after, especially eco-estates and retirement developments
- There is an increased demand for offshore property with Mauritius remaining an attractive destination for South Africans.
IMAGES: CCID