Business as usual as house sales tick over
• Demand is there, but sellers warned to price their property realistically, writes Alistair Anderson
The residential housing market has been mostly business as usual in terms of sales volumes and price growth in SA in 2017, but the glory years of the past are gone for sellers.
“Even in the current environment, people need somewhere to live, so to a large degree it’s a case of business as usual, as long as there is a realistic sense that at the right price, and the right location, there is huge, pent-up demand. Underpinning the ongoing sustainability of our housing market is an ever-increasing demand for housing which spans all sectors and price bands, further fuelled by an emerging middle class which is becoming increasingly prosperous across a broader base,” says CEO of Pam Golding Properties, Dr Andrew Golding.
He said it was notable that a young generation of aspirant home buyers and renters, semigrants and people relocating for new life stages was driving continued demand in the housing market.
Commentators say building activity has not yet fully recovered to pre-recession levels, which means that in many key hubs and prime locations, predominantly in the major metros, demand is outstripping supply — particularly sectional title properties which are more affordable to purchase, less expensive to maintain and better suited to current lifestyles, offering security and lock-up-and go convenience.
Reviewing the latest Pam Golding Residential Property Index, certain trends stand out. Activity in the price band below R1m remains active. While national house price inflation has averaged at 4.25% during this year, it lost momentum in recent months and recording an increase of just 3.9% in the third quarter of this year.
In contrast, Western Cape house price inflation is gathering momentum and outperforming other metros, even as the other major regions show slowing growth in house prices. The Western Cape’s average house price inflation was 9.81% in the first nine months of this year, while Gauteng’s was only 2.88% and KwaZulu-Natal’s was 4.41%.
House price inflation for houses under R1m was 13.73% in the Western Cape and 10.14% for houses priced between R1m and R2m. Houses priced more than R2m also held up with house price growth of 4.99%.
In the luxury market, Golding says his team has seen a marked increase in the number of super luxury or R10m to R50m properties being sold over the past five years.
“Regarding luxury properties, which are generally regarded as those selling for R3m upwards, sales remain steady with some notable PGP sales at the top end of the market,” says Golding.
These include in the Boland and Overberg region of the Western Cape, where three commercial wine farms were each sold for more than R100m; and numerous sales, including high end residences, lifestyle farms and agricultural farms, priced from R20m to more than R50m, and predominantly on the Cape Atlantic Seaboard in areas such as Clifton, Camps Bay, Fresnaye and Mouille Point as well as Bishopscourt and Constantia in the southern suburbs, and Knysna on the Garden Route.
PGP set a new record price for Bedfordview in Johannesburg East, Gauteng with a house sale of R30m.
“We attribute the continued demand for residential property at the top end of the market to a number of trends including a migration of high net worth buyers from north of the country to coastal areas, the investment market also investing in these areas, and, third, a small increase in foreign buyers both from Africa and other continents,” said Golding.
In terms of the top end rental market, the Atlantic Seaboard is a perennial favourite and the likes of PGP achieved rentals of R30,000 per day for a villa in Bakoven and R23,000 per day for a Clifton bungalow. Significant rentals have also been achieved in Constantia, where a villa has been leased for R37,500 per day. Notable monthly rentals in Cape Town’s southern suburbs include R163,000 for a home in Bishopscourt and R100,000 for a Constantia property.
Seeff Properties has also enjoyed a fair year with respect to its Atlantic Seaboard and City Bowl properties, but not necessarily a strong one.
“The Atlantic Seaboard and City Bowl property market already tops R5.7bn in sales for the first nine months of this year, a whopping 82% higher than five years ago, but our agents have reported that unrealistic sellers are losing out on good deals,” said chairman Samuel Seeff.
Billy Rautenbach, sales director for Seeff, says agents are almost unanimous in their view that seller expectations are hampering sales.
“After a rather subdued winter, we welcome the warmer summer months, traditionally a busier period for the market. The message to sellers, though, is that if you do not adjust your price expectations to match the deteriorating market conditions, time may well be running out,” she says.
Propstats data shows that the total value of sales for the nine months to end September for the combined Atlantic Seaboard and City Bowl market stood at R5,752,615,370. While the rand value of sales overall was down by only 3% year on year, the number of units sold is down by 15% and agents are observing a declining trend as the year progresses, she says.
Overall, the market is down by about 15%-20% from the highs of 2015.
“The market performance has been largely propped up by the sectional title sector which still offers lower, more accessible pricing.”
Adrian Mauerberger and Cecily Sher, luxury sectional title agents for the Atlantic Seaboard, note that it is mostly the sub-R8m price sector that is still seeing activity, but there is a fair degree of fence-sitting among buyers.
“Although we have the challenge of high price expectations, there are many good buys in the market and this is perhaps not the best strategy if you consider how prices have risen over the past few years,” they say.
The average sectional title selling price currently stands at R7,030,321, 147% more compared to five years ago.
“Buyers should not hesitate to put in offers, even if it is below the asking price. Remember, when market conditions slow down, it is a good time to increase your property portfolio as you are able to buy at more conservative price levels. Once the market turns, you will reap the rewards,” they say.