Areas and Places

Expansion of Somerset West residential property market

Many Western Cape property trend watchers, including a large number of those in Cape Town, still do not appreciate just how fast both the residential and the commercial property sectors in the Somerset West area have expanded recently.

This was said by Schalk van der Merwe, co-franchisee (with his father, Johann) of the Rawson Property Group’s Somerset West franchise.

“The latest big development to be launched here, Sitari Fields, has,” said van der Merwe, “been complemented by fast ongoing commercial development along the N2 throughout our area – and it follows on from a whole string of earlier developments such as the De Velde, Kelderhof and Croydon estates. The timing of Sitari Fields is excellent because these and many other estates and retirement villages in the area are now either sold out or approaching that stage.”

Sitari Fields, said van der Merwe, will deliver 3,150 residential luxury apartments, village and country homes complete with an exclusive Curro School and shopping centre a short distance away over a seven year period with plots starting at R530,000 and complete apartments from R1,115,000, which, van de Merwe said, is ‘exactly right’ for this area.

“We know from experience that this is where demand in and around Somerset West is strongest,” he said.

In his view, added van der Merwe, Sitari Fields reflects the strong confidence that most people in the Helderberg property sector feel about Somerset West property in general, a confidence of which many who do not live here are still unaware but which, ironically, is often shared by Gauteng residents, who each year migrate to this area, either for retirement or for work purposes.

Asked why he is so bullish about Helderberg’s property future, van der Merwe said that he and his team are now looking back on a January to July 2014 period in which their sales were double those of the same period last year.

“By the end of July this year we had sold 204 properties. In the same period last year we sold 105. Our turnover so far this year has been R245 million – again a 100% increase on the same period last year. Obviously with figures like this, one cannot but have faith in the area.”

This franchise now employs 20 sales agents who are then supported by clerical/data staff who do much of the time-consuming paperwork, leaving the sales agents free to service their clients.

Although the strongest demand in Somerset West is in the middle price brackets, at the lower end of the market, i.e. properties valued at below R800,000, said van der Merwe, there has also been a big increase in sales. Here, he said, demand is stimulated by the doubling of the investor client base, who are now responsible for 8,5% of the franchise’s sales, whereas a year ago they were responsible for only 4%. Investors are motivated by the fact that, with initial returns on residential property now often above 8% per annum, many properties are now self-supporting from day one.

The upper end of the market, said van der Merwe, is also witnessing an upsurge, with the result that his franchise is now short of homes in the R5,5 million to R7,5 million category, particularly homes which are not only priced at this level but are also in security estates.

Looking ahead, van der Merwe does not foresee any significant slowdown in the sales rate, although he does predict that the standard interest rate will rise to 10% by mid-2015. Coupled with the fact that most loans are now made at prime plus, this is bound to have some effect on buyers’ ability to afford homes.

“What has, however, been encouraging,” he said, “is the banks’ willingness in selected cases to award 100% bonds for properties worth up to R2,5 million – the previous upper level was R1,5 million. This is important when you consider that every R1 million in the sales price leads to increased interest payments of R1,000 per month.”

Van der Merwe commented, too, that there has recently been a growing tendency for the banks to evaluate a property on desktop statistical information without actually visiting it. It has made it necessary for him and his team very often to apply for a reassessment, which in most cases has been granted.