Advice and Opinion

International buyers noticeably more active, reports PGP

After six years of bearish conditions in the residential property market, there is no question that the market has now entered an upward trend, says Pam Golding Properties’ (PGP’s) MD for the Western Cape metro region, Laurie Wener. She reports that buyer activity in the greater Cape Town metropolitan area was notably higher in the first 10 months of the company’s financial year (March to December 2013), particularly from mid-2013 onward. “This resulted in reduced stock levels and even stock shortages in high-demand areas, which in turn fuelled capital growth. There has also been an upturn in the number of investment buyers and international buyers, indicative of increasingly positive market sentiment,” says Wener.

Comparing the above trading period in 2013 with the same period in 2012, PGP has achieved a 20 percent increase in units sold in the Cape Town metropolitan area, bringing total sales for March to December 2013 to 1024 residential properties (for this area). Wener says the most significant increases in individual areas were Sea Point (65 percent growth), Newlands (57 percent), the City Bowl (53 percent) and Camps Bay (55 percent), as well as the “Atlantic Prestige” office which services top-end properties on the Atlantic Seaboard (27 percent), and the Southern Suburbs (27 percent). Wener attributes these significant increases not only to an upswing in market conditions, but also to PGP gaining additional market share in these areas. Over half of all unit sales concluded by PGP in the Cape metro region during this period were cash sales.

Areas with most notable activity

“These trends are certainly not uniform throughout the region,” says Wener, “but have been most pronounced in the Atlantic Seaboard, Southern Suburbs and Western Seaboard, as well as some parts of the South Peninsula – all traditionally recession-resistant areas. Much of the buyer activity has been in the apartment market on the Atlantic Seaboard and City Bowl, where the market has changed rapidly from a marked over-supply to an acute shortage of stock. Demand is now substantially outstripping supply, pushing prices up by as much as 20 percent in some instances.”

Another area seeing significant market recovery has been the V&A Waterfront. “While flooded with stock over the preceding five years,” says Wener, “in 2013 this location experienced a rapid recovery, due to the wide selection available and softened prices – not to mention the high desirability of this internationally acclaimed destination, all of which attracted cash buyers. Stock levels have reduced dramatically once more, serving to stabilise prices and precipitate a shift from a buyer’s to a seller’s market.”

Drivers of a positive trend

Wener attributes the market upturn to several factors. “The turnaround cannot be attributed to economic factors, but seems to be a natural progression in a cyclical market after a prolonged period of muted activity. Prices had softened and stock levels increased, creating excellent opportunities for home buyers to achieve sound value for money, so it was only a matter of time before activity levels began to rise. Coupled with this, the sustained low interest rate environment and improved access to mortgage finance contributed to local buyer activity, while favourable exchange rates for international currencies attracted new international investors and part-time residents.”

Cape Town’s increasingly positive international image has also contributed to the city’s global profile. “Highly favourable exposure in international media regarding Cape Town as a premier holiday destination, coupled with the city’s selection as host of World Design Capital for 2014, has ensured that the spotlight has remained firmly focussed on the Mother City as a desirable investment destination, and one offering arguably the best lifestyle in the country,” says Wener. “The efficient administration of the City of Cape Town has also become a major draw-card for upcountry buyers, who feel that the value of their investments here in the Cape has the potential to considerably exceed that offered elsewhere in the country.”

International buyers

PGP reports a noticeable upturn in foreign buyer activity during this period (March to December 2013), from a much broader range of international sources than previously experienced. “In addition to our traditional client base from the UK and Germany, we also saw a number of buyers from other African countries, including Nigeria, Ghana, Angola, the DRC and even Somalia,” says Wener, “as well as European buyers from Holland, France, Belgium and Greece. There were also a few purchasers from Scandinavia, the USA and even Bermuda. China is another growing market, with a number of buyers relocating to settle and work in South Africa, or travelling here on long-term employment contracts.”

Top prices achieved

Despite the fact that activity at the top end of the market remains relatively slow, PGP has concluded a number of notable top-end sales during the period under review. These include:

· R34.5 million for a penthouse at The President in Bantry Bay, sold to an international buyer

· Four apartments at the V&A Waterfront sold for over R16 million each – including a top price of R25 million. Three of these sales were to international buyers, and one to a Johannesburg-based client.

· Three sales in excess of R20 million in Fresnaye – with the highest being R110 million. Two of these sales were to international buyers.

· Four sales in Clifton over R15 million, including a top price of R26.7 million. Three of these sales were to international clients.

· Three sales in Camps Bay between R20 million and R30 million – all to international buyers

· Two sales in Bishopscourt at R26 million and R20.5 million – one to an international purchaser

· Two sales in Constantia Upper between R18 million and R20.5 million – one to an international buyer

· Three notable sales in Hout Bay – R21.8 million to a South African living in Singapore, R25.5 million to a European buyer, and R26 million to a Johannesburg buyer

Investors

The year 2013 saw the return of the investor buyer, with particular interest in small sectional title complexes across the city. Wener notes that completed new developments are being zealously acquired: “There is strong demand for new, modern, attractive homes in small secure developments, as well as healthy interest in small developments being sold off-plan.”

Rentals

“Our residential rentals division reported another excellent year,” says Wener, “with December 2013 alone reflecting a 29 percent increase on the total rentals concluded in the same month in 2012. The Southern Suburbs and Atlantic Seaboard figures were particularly notable, being 40 percent ahead of their totals for the previous December.”

Top-end rentals in the Atlantic Seaboard, City Bowl and Southern Suburbs included 22 long-term lets with values of between R25 000 and R79 000 per month, as well a short-term rental in Bishopscourt at just over R1 million for a single month.

There is also healthy demand for student rentals and family homes located close to leading schools. “Our rental business is limited only by the amount of stock available,” says Wener.

Buyers remain value-conscious

Although greatly increased in numbers, buyers remain cautious and value-conscious, says Wener. “Positively, consumer awareness has increased exponentially, with purchase decisions no longer driven by predominantly emotional factors, but rather by commercial terms. We remain optimistic that the market is indeed in a sustainable recovery mode, albeit indicating varied demand and performance across different areas.”

For more information on residential property sales in the Cape metropolitan area, contact Laurie Wener on 021 673 4200 or laurie.wener@pamgolding.co.za

**All prices quoted are actual selling prices, and all sales mentioned were concluded by Pam Golding Properties, unless otherwise specified.

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