De­mo­graph­ics in­flu­ence South Africa’s res­i­den­tial prop­erty mar­ket, say ex­perts

Weekend Argus (Saturday Edition) - - PROPERTY -

AC­CORD­ING to re­cent re­search by Pam Gold­ing Prop­er­ties’ ( PGP) in­ter­na­tional part­ners, Sav­ills, the sin­gle fun­da­men­tal driver of res­i­den­tial prop­erty de­mand has al­ways been the num­ber of house­holds in a pop­u­la­tion want­ing a roof over their heads.

The price of those roofs is then a func­tion of the num­ber of prop­er­ties and the amount of money avail­able with which house­holds can com­pete for them, said PGP chief ex­ec­u­tive, Dr An­drew Gold­ing.

“This means that three key fac­tors will make for house price growth in ex­cess of gen­eral in­fla­tion: grow­ing pop­ula- tion, in­creas­ing af­flu­ence and lim­ited land and hous­ing sup­ply. The re­search also showed that the ab­sence of one of these vari­ables can stall a hous­ing mar­ket and the ab­sence of two or more can send prop­erty val­ues down­ward,” said Gold­ing.

Ac­cord­ing to the re­cently re­leased 2014 De­vel­op­ment Indi­ca­tors report, South Africa’s pop­u­la­tion has risen to just over 54 mil­lion and is grow­ing at a pace of ap­prox­i­mately 800 000 peo­ple each year.

In ad­di­tion, South Africans are mi­grat­ing at a rapid pace within the coun­try, re­sult­ing in more pro­nounced pop­u­la­tion trends within the var­i­ous prov­inces and met­ros. For ex­am­ple, be­tween 1996 and last year, Gaut­eng’s pop­u­la­tion is es­ti­mated to have in­creased by 60 per­cent and the Western Cape by 50 per­cent. Dur­ing the same pe­riod, the Free State and the East­ern Cape both lost about 20 per­cent of their res­i­dents.

For those mov­ing to Gaut­eng and the Western Cape, the ma­jor cities are the big­gest draw­cards – re­in­forc­ing the rapid pace of ur­ban­i­sa­tion in SA. About 64 per­cent of the pop­u­la­tion lives in ur­ban ar­eas, but the UN es­ti­mates that by 2050 this will rise to nearly 80 per­cent.

The search for em­ploy­ment is of­ten the mo­ti­va­tion for mov­ing house, SA’s ur­ban ar­eas are grow­ing larger and younger. The govern­ment es­ti­mates that twothirds of SA youth live in ur­ban ar­eas. The re­sul­tant “youth bulge” in the cities is vis­i­ble when com­par­ing the pop­u­la­tion pyra­mid for the coun­try as a whole with the age dis­tri­bu­tion of peo­ple liv­ing in ma­jor cities like Gaut­eng and Cape Town.

“Ac­cord­ing to mort­gage orig­i­na­tor ooba, the av­er­age age of mort­gage ap­pli­cants is 37 and that of first-time buy­ers is 34. Given that the largest age co­hort in both Cape Town and Jo­han­nes­burg in 2011 (most re­cent cen­sus data) was peo­ple be­tween the ages of 25 and 29 years, it seems likely that both cities will be­gin to ex­pe­ri­ence strong growth in de­mand for hous­ing about five years from now, as this ‘ youth bulge’ reaches the age of the av­er­age first-time house­buyer in SA,” said Gold­ing.

“We think the first of the three met­rics iden­ti­fied is likely to con­tinue to pro­vide a strong un­der­pin­ning for the lo­cal hous­ing mar­ket – par­tic­u­larly in the ma­jor metro ar­eas, dur­ing the decade ahead.

“When it comes to af­flu­ence, cities and large towns gen­er­ate over 80 per­cent of SA’s eco­nomic ac­tiv­ity, with ma­jor metro ar­eas grow­ing twice as fast as smaller towns and cities. Av­er­age in­comes in ma­jor met­ros are typ­i­cally about 40 per­cent higher than for the coun­try as a whole, and em­ploy­ment has grown twice as fast as other ar­eas.

“As a re­sult, be­tween 1996 and 2012, met­ros ac­counted for 75 per­cent of all net job creation in SA. Fur­ther fu­elled by ac­cess to key trans­port routes and pub­lic trans­porta­tion, and an in­creas­ing de­mand for con­ve­nient, ur­ban liv­ing, it is no sur­prise then that the hous­ing mar­kets in met­ros typ­i­cally out­per­form the na­tional av­er­age.

“The grow­ing af­flu­ence in metro re­gions, even as growth in the na­tional econ­omy con­tin­ues to lose mo­men­tum, ex­plains why house price in­fla­tion in Cape Town, Jo­han­nes­burg and Pre­to­ria con­tin­ues to ac­cel­er­ate as these hous­ing mar­kets ben­e­fit from grow­ing pop­u­la­tions, a rel­a­tive short­age of hous­ing and grow­ing af­flu­ence.

“Turn­ing to the ques­tion of re­gional out­look, ac­cord­ing to our Prop­erty In­dex, the top per­form­ing re­gional hous­ing mar­ket is the Western Cape. Its large ser­vices sec­tor is at least partly in­su­lated from slow­down in China’s com­mod­i­ty­heavy econ­omy. Also, the steady mi­gra­tion from other prov­inces and the lim­ited num­ber of new hous­ing units com­pleted means that all three met­rics for the hous­ing mar­ket are in­flu­en­tial.”

Gold­ing said that house price in­fla­tion in the Western Cape has av­er­aged eight per­cent this year, well above the na­tional av­er­age of 5.8 per­cent, while house prices in Cape Town con­tinue to reg­is­ter dou­ble-digit growth rates – an av­er­age of 10.1 per­cent in the year to May. Over and above this, the At­lantic seaboard con­tin­ues to out­per­form other ar­eas with house price growth of around 25 per­cent for the past 12 months.

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