Sandton’s status as South Africa’s financial hub has to a large extent cushioned the suburb’s sectional title market, with demand for residential property remaining consistent despite the economic slump and weaker buyer sentiment.
But the once-buoyant sector is being subdued by over-supply as ongoing development outpaces demand.
This is according to Robin von Mayer, Sandton and Morningside Sectional Title Specialist for Lew Geffen Sotheby’s International Realty, who says that over-supply has led to a buyer’s market across the suburbs.
“That said, properties offering great value at accessible prices will always find ready buyers, albeit at a slower pace”.
“The more affordable value-orientated sector of the market at a lower Rand per square metre has proved to be the most consistently active, which is a common response in a competitive and saturated market. It also benefits from a wider buyer base that includes first time buyers, empty-nesters, investors and those seeking relocation”.
“Especially sought-after at the moment are family homes such as townhouses or cluster units in the R2.5 million to R3.5m price band as well as one bedroom apartments for around R1m that generally offer investors better returns than their larger counterparts.”
Von Mayer adds that the latter are especially popular with investment buyers who can expect a very healthy rental return of R8 000 per month on an apartment that costs R900 000.
“With the growth of the commercial market in Sandton, the continued influx of people seeking accommodation closer to work has definitely been a big positive for these market sectors.”
The middle and upper market segments may have slowed and their buyer base has narrowed in Sandton and Morningside, but they are still attracting investors.
“We have seen a steady increase in Indian and Chinese investors in the middle market, many of whom come to South Africa on fixed-term contracts and believe it is a better option to buy rather than rent as they can either sell at a profit or rent out the properties once their contracts have expired”.
“High-end apartments in Sandton still carry prestige, especially in the new luxury developments, and these are predominantly purchased by affluent investors who have business interests in the area.”
Von Mayer says: “Sandton and Morningside may carry the location status, but many of the surrounding suburbs offer more property for the same amount of money and landlords and investors need to acknowledge this and act accordingly”.
“This is especially true for two-bedroom units where demand has dropped significantly, partly due to the fact that the corporate market has taken a knock with many companies decreasing accommodation budgets.”
According to Von Mayer, the sectional title market is generally more competitive in areas further from the CBD due to factors like affordable off-plan options and a broader target market that offer more resale options and, as a result, suburbs like Fourways, Douglasdale and and Rivonia continue to enjoy healthy demand, especially in tougher economic climates.
“In areas closer to the Sandton CBD like Illovo, Sandhurst, Morningside, Sandown and Strathavon the sectional title off-plan developments are less affordable and more prestigious, aimed towards a different market segment and this has shrunk considerably over the past year.”
Lew Geffen, Chairman of Lew Geffen Sotheby’s International Realty, believes that although the market will continue to take pressure for some time, owners shouldn’t panic.
“Sandton will always enjoy a high demand for residential property and it must be born in mind that a correction process is often better for the overall health of the market”.
“In times like these it is always better to sit tight and ride the storm and new investors should be prudent in their property selection and regard any purchases made now as long term investments rather than short-term flips.”
He concludes that while the ongoing sectional title development may have temporarily subdued the market, the investor confidence bodes well for the area and large-scale office developments in Sandton which continue to attract new corporates to the node will benefit the residential market in the long term.