Activity in the residential property market in the Western Cape continues to gather momentum with no indication of slowing pace, reports Laurie Wener, Pam Golding Properties’ MD for the Western Cape in the Cape Town Metropole.
“Currently, the status of the residential property market around South Africa is a topic generating intense interest – from expert comment to popular dinner table conversation – as it is enjoying what appears to be a sustained upturn which defies the economic constraints generally being experienced by other sectors. The areas in and around the Western Cape, and specifically including the Cape Town Metropole, provide an interesting microcosm of the country’s housing market, resulting in the region often being regarded as a national property barometer.”
“The statistics in the Western Cape reveal that positive market sentiment and a general improvement in sales activity has accelerated into 2014. We find this is to the extent that the number of sales and rental transactions being successfully concluded in this region is being limited only by stock availability, with demand outstripping supply across the board in all areas and across all price bands,” says Wener.
Significant year on year growth
Looking specifically at property transfers in the Cape Town metropolitan region, a comparison of the calendar year 2012 versus 2013 shows overall growth of 2.1 percent in the number of units sold, with 15.9 percent growth in total sales value, and a 13.4 percent increase in the average property price. “Broken down into price bands,” says Wener, “some of the most significant increases have been in the R5 to R15 million price bracket, with a 34.3 percent increase in units sold and 37.8 percent increase in value of properties sold. There has also been substantial improvement in the price band above R15 million, with an increase of 85.7 percent in units sold and 95.8 percent in value.” (Source – Lightstone, sales by all agencies)
“Notably, during the year to date (January to early July 2014) activity has increased even further, with a dramatic reduction in stock levels across the board, which is in turn driving up prices. The actual activity for this trading period will become apparent when all the property registrations become available from the Deeds Office in the coming months.”
What are the factors driving this relatively rapid turnaround in the property market? Wener says there are several. Firstly, there remains a constant demand for free-standing homes of all sizes and at all price levels. Furthermore, over the past 18-24 months the demand for sectional title apartments in particular has burgeoned, and for a variety of reasons.
“Distinct current trends in the market place indicate a tendency for families to scale down earlier than previously, thereby creating an increasing demand for three bedroom apartments with generously proportioned patios, which lend themselves to a convenient and appealing lifestyle,” she says. “Further boosting this trend is the compelling desire among consumers to reduce the utility costs inherent with ownership of properties on larger grounds. This is coupled with the need for good security and the benefits of residing closer to the workplace and educational facilities in order to reduce travel time and cost.”
She says apartments in Cape Town are also highly sought after by part-time residents whose primary homes are outside the Cape. “This buyer’s preference is for owning an apartment close to the seaside, as this is ideal for personal use, easy to rent out due to prime location, and has the potential for excellent capital growth. Apartments are also very much in demand among both local and foreign students and staff who wish to live within easy reach of tertiary educational institutions and hospitals, where they can enjoy a secure and low-maintenance lifestyle.”
“New developments are once again very much in demand,” Wener continues, “due to both the general stock shortage and the allure of acquiring a modern, well-designed apartment in a brand new building, with adequate covered parking and excellent security.”
“Then there are the investors,” Wener adds, “for whom property is the ultimate medium- to long-term investment, and for whom the generally recession-resistant Cape, with its many well-established suburbs and perennially high demand, is viewed as the prime location for an investment property – particularly an apartment which is eminentlylettable.”
Ultimately, says Wener, the main drivers of the upturn in sales activity in the Cape’s residential property market are South African residents themselves, for whom general sentiment has lifted, prompting them to make adjustments and choices to suit their own changing lifestyles and circumstances. Also adding significantly to the demand are buyers from other regions in the country, predominantly Gauteng and KwaZulu-Natal, who aspire to owning a property in the Cape and collectively span multiple price brackets.
“Over and above this, the favourable exchange rate on foreign currencies and ongoing international focus on Cape Town as a world class cosmopolitan destination, has certainly seen a renewed increase in foreign buyers,” says Wener. “However, it is a misconception that they are dominant drivers of the property market, and indeed, South Africa’s socio-political issues and economic fundamentals remain a moderating factor with regard to foreign activity. Foreign demand has indeed returned, but remains low by comparison, and concentrated mainly in certain areas such as the Atlantic Seaboard, City Bowl and some parts of the Southern Suburbs such as Constantia, Bishopscourt and Newlands. This is true for both residential sales and rentals.”
Access to finance
The acquisition of mortgage loans remains challenging across the board, notes Wener. “However, this is mitigated to a large extent by the high percentage of cash sales of well over 50 percent and by the relatively low loan-to-value mortgages in this region. While banks remain conservative in their approach, it would appear that Cape Town buyers are generally considered fairly low-risk.”