Cape Town’s economy is flourishing under investor confidence that is attracting multi-billion Rand investments and pushing the province to consistently outperform national GDP growth, but the widening disparity between the local and national economies is not without its drawbacks, especially in the strident property sector.
Lew Geffen, Chairman of Lew Geffen Sotheby’s International Realty says: “The reality is that surging property values spurred by the growing demand from upcountry semigrants has not only driven up prices buy also precipitated a severe shortage of affordable entry level homes, especially in sought-after areas like the Southern Suburbs”.
“Steep price increases during the past five years have significantly raised the entry level point in this popular suburban area with entry level prices in suburbs like Rondebosch and Claremont now on a par with mid-level price bands in many comparative neighborhoods in other metros”.
“Houses in the R1.5 million to R2.5m bracket and apartments for less than R1.5m have become rare commodities and when they do come onto the market they are often snapped up within hours.”
Citing Lightstone data, Geffen says that the Southern Suburbs have experienced steady year-on-year growth from 2010.
“In Rondebosch, for example, at the end of 2010 the average house price was R2.6m, but after a solid 9% nominal growth per annum over two years the price jumped to R3.3m by the end of 2013 and a nominal year-on-year increase of 17% saw 2015 end on an average sale price of R4.5m”.
“Apartments in Rondebosch fared equally well, with the average price increasing from R900 000 in 2010 to R1.3m in 2015 and by the second quarter of 2016 it reached R1.6m”.
Megan Milne, Candidate Agent for Lew Geffen Sotheby’s International Realty in Rondebosch says that there are occasionally still apartments to be found in the R1m to R1.5m price band but they are usually in older blocks and usually barely hit the market before being snapped up, sometimes even the same day.
“This especially true if they fall within the university catchment areas and near the Jammie shuttle route as there is a serious shortage of student accommodation”.
“Parents who live in Durban or Johannesburg are aware of the demand for these apartments and sometimes place offers even before seeing the apartments as they know from experience that in the time it takes them to fly to Cape Town for a viewing, the apartment is likely to be sold.”
Milne adds that there is also a huge demand for sectional title units in modern complexes which offer excellent 24 hour security as well as safe off-street parking.
“These two criteria top the list for many of my clients and buyers will often increase the amount that they are willing to pay if the apartment includes a garage or parking bay.”
Tina Malyon, Area Specialist for Lew Geffen Sotheby’s in Mowbray and Rosebank says that although these suburbs still offer good value compared to their pricier neighbours, it is very rare to find a house in Rosebank for less than R3.5m and in Mowbray house prices now start at R2.6m.
“It is common for well-priced homes to sell within a week and I have a growing waiting list of buyers who lost out on these quick sales”.
“Instead of show days on Sundays I now have mini show days during the week between 2pm and 5pm which attract the serious buyers and who very often put in offers immediately.”
Dave Burger, Area Specialist for Lew Geffen Sotheby’s in Kenilworth and Harfield Village says that since the beginning of the year, stock has become much harder to source and they now have a waiting list of buyers waiting for their ideal property to come onto the market.
“The problem is also exacerbated by sellers who are holding out for unrealistic prices because they are buying other properties in more expensive areas.”
Burger adds that the growing demand has spurred new development in the area and two new sectional title developments are currently under construction.
Wynberg has long been popular with first time buyers as its wide range of properties has always included accessibly priced entry level houses, but Jennifer Rogers, Area Specialist for Lew Geffen Sotheby’s, says there are now far fewer options.
“Occasionally houses for under R2m do still come onto the market, but these are compact two bedroom character cottages which are ideal for young professionals but often too small for growing families.”
However, buyers who are willing to look a little further afield still have a small but shrinking window of opportunity to buy a family home for under R2m without a bun fight on the first day of its release.
Steve Thomas, the Franchise Manager for Lew Geffen Sotheby’s International Realty in False Bay and Noordhoek, says that False Bay, Fish Hoek and Noordhoek properties tend to be more affordable at family-size entry level than most other suburbs in Cape Town’s south.
“An apartment in Wynberg or Plumstead that needs refurbishment and is on the market for around R1.2m to R1.3m will sell within a matter of hours at the moment – it’s definitely a flipping market”.
“But if you’re looking for somewhere to live, Fish Hoek offers similar properties for less than R1m and it’s still possible to buy a three bedroom house for between R1.9m and R2.4m, but you do need to be on your toes here as well, because while they may not sell within hours we’ll usually take offers within a week.”
Thomas says sectional title properties that are put on the market in his area through channels such as Property 24 will normally receive 20 to 30 responses from interested parties within the first few hours, while the more expensive freehold houses will elicit an average of 15 responses within the first week.
“It’s no longer unusual this year to sell properties within a day of going to market, and we’ve had buyers who have put in offers to purchase sight unseen, often just on the basis of a friend or relative going to view the property for them and making a recommendation,” he says.