Damper on home prices

Cape Town homeowners are facing a double whammy: a water crisis and slowing house price growth.

Western Cape homeowners have seen a 50.4% increase in their properties’ value over the five years to December 2017, compared with 31.9% for KwaZulu-Natal and 21.9% for Gauteng, according to FNB’s latest figures.

The reason? The perception that the Mother City is the bestrun metro in terms of service delivery, offers a good life/work/ play balance and has good government-run schools.

House prices also benefitted from continued “semigration” of buyers from Johannesburg, Tshwane and KwaZulu-Natal to the Western Cape for a more relaxed lifestyle.

However, the water crisis and fast-approaching Day Zero is starting to impact on house price growth and up-country buyers’ desire to relocate. Cape Town house prices still beat inflation, but slowed to 9.7% in 2017’s fourth quarter from highs of 15% in 2016’s first quarter, according to Standard Bank. “Although it is difficult to separate and quantify the reasons for this easing growth, the water crisis will have exacerbated it,” the bank’s Siphamandla Mkhwanazi said in a note.

“Also, the drought and government’s slow response will affect consumer sentiment negatively; demand for property is therefore expected to suffer and, ultimately, further dampen house price inflation.”

Figures from FNB’s John Loos showed that in 2017’s fourth quarter, Western Cape house price growth slowed to 4.4% (Q3: 4.8%). Loos said the decline might be driven by the water crisis and buyers looking for value-for-money elsewhere.

“We are still seeing buyers from Port Elizabeth, Durban and Johannesburg looking for properties in Cape Town. But many are taking a wait-and-see approach about how the water shortages are dealt with,” said RE/MAX Premier’s Kevin Jacobs.

Upper-end property has been hardest hit. “If effectively managed and contained for a few months, [the water crisis] will not impact the long-term desirability of living in Cape Town. But a prolonged crisis will impact on sentiment and may affect property prices until it normalises,” said Richard Day of Pam Golding Properties.

A prolonged water crisis would impact on sentiment and could affect property prices until it normalises.

Richard Day Pam Golding Properties