They’re being frozen out of good life
Cape Town property becoming increasingly inaccessible to first-time buyers
IT IS widely known that the Cape Town residential market is the strongest in South Africa with significantly higher property values as well as a the lion’s share of the country’s most expensive streets and wealthiest suburbs.
However the city lags dismally in one significant aspect. According to a report published this month by FNB household and property sector strategist John Loos, Cape Town has the lowest percentage of first-time home buyers in SA, with only 16 percent of total sales being in this demographic – considerably lower than the national average of 21 percent.
And, as first-time buyers account for between 20 percent and 25 percent of sales in all five of the other major metros, led by Mandela Bay, Cape Town is also the only city where these sales account for less than 20 percent of its market.
Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, agrees. “There has been dramatic price inflation in Cape Town during the past decade, with the increase in property values far exceeding consumer inflation and placing property in the most soughtafter suburbs well out of reach of most first-time buyers.
“For instance, in 2006 it was possible for a young family to buy a comfortable three-bedroom house in Rondebosch for around R1.5 million and prices for two- and three bedroom flats generally ranged between R700 000 and R800 000.
“Despite the current market slump, an apartment in Rondebosch for under R1.5m would now be a very lucky find indeed and a family home for under R3m would most likely require considerably more than a little TLC.”
Geffen says that most first-time buyers require financing and are often unaware of the criteria they need to meet to qualify for loans. In addition to an applicant’s credit worthiness, banks also take into account regular monthly expenses and existing debt.
“And, as the upsurge in property values has also leapfrogged ahead of salary increments, many first-time investors are unable to afford the monthly bond repayments for 100 percent bonds, and a growing number are forced to delay their purchases while they save for larger deposits.
“To put it in perspective, you would need a monthly household income of at least R90 000 to buy a R3m home, R22 600 to qualify for a bond for an apartment of R680 000 and R270 000 a month to finance a family home of around R7m in a sought-after golf estate or suburb like Camps Bay.”
In April CareerJunction released its annual salary index which tracks year- on- year changes in marketrelated pay across 10 sectors in SA. In 2016, most job sectors covered by CareerJunction saw an increase in average salaries, with pay climbs in 71 of 107 careers. However for 36 jobs the average salary offered dropped – by as much as 60 percent.
The regional breakdown was not as bright, though. In nine of the 10 sectors tracked by CareerJunction, average inflation-adjusted salaries for new positions dropped in the Western Cape year-on-year by up to 28 percent and the biggest losers were the finance and engineering sectors.
According to the survey, nationally the biggest climber in the earning stakes was for investment bankers, where a skilled employee was likely to be offered in the region of R39 659 a month.
As daunting as all this may sound, all is not doom and gloom, says Geffen, because it’s often in tough economies where the best deals are to be found and there are still areas in Cape Town that offer value and accessible prices.
One of these suburbs is Muizenberg, where you can buy a modern cluster home in Costa da Gama or Capricorn from around R650 000 and enjoy a relaxed seaside lifestyle at a fraction of the price of similar suburbs.
This is according to Steve Thomas, franchise manager for Lew Geffen Sotheby’s International Realty in False Bay and Noordhoek, who says that property here is also an excellent investment.
“Since the market began to pick up in 2013, Muizenberg has become increasingly popular with young families who are drawn by its vari- ety of property options, accessible prices and lifestyle.”
“Those who prefer to be closer to town and several of Cape Town’s best schools will find excellent value in Wynberg where they can enjoy the same top class amenities as residents in neighbouring suburbs, but at a much lower price,” says Arnold Maritz, southern suburbs co-principal for Lew Geffen Sotheby’s International Realty.
“In Wynberg it’s still possible to get a foot in the southern suburbs market for well under R1m with the entry level price being between R500 000 and R900 000 for a one- or two- bedroom flat and, although increasingly rare, good entry level apartments can still be found in Rondebosch.”
Brendan Miller, Lew Geffen Sotheby’s International Realty Atlantic seaboard and City Bowl chief executive, says the growing demand for property close to the CBD and Waterfront business precinct has driven up prices considerably and the once affordable City Bowl is now out of reach for many first-time buyers.
“However, there are still pockets in the area which are more accessible and young professionals who prefer to live near the vibrant CBD will find good value in Zonnebloem and District Six, where they can buy a comfortable two-bedroom apartment for between R1.1m and R1.4m or a one-bedroom or bachelor pad for around R1m.”
Investors who don’t work in the CBD or who don’t mind a longer commute have a choice of entry level options on the Western seaboard. In suburbs like Sunningdale a modern two- or three-bedroom cluster home can be found for between R1.4m and R1.8m and several areas in the northern suburbs also offer similar options.
In conclusion, Geffen says that the rules for a good property investment never change, whether the economy is good or bad. “It’s a hackneyed phrase, but it’s always going to be location, location, location. The golden rule is to buy property in the best area you can afford – one that appeals to a broad market. This applies whether you’re a seasoned or a first-time buyer.
“Broad appeal factors are numerous and multi-faceted, and sometimes you need to think laterally. A property near a university, for instance, might not be on your radar if you don’t have children of that age. Considering the scarcity of student accommodation at tertiary institutions, though, properties on shuttle routes or within walking distance of campuses will in most instances appreciate significantly in value over time.
“In general terms, though, the major boxes to tick for city dwellers are whether the property is secure, whether it’s in a suburb with a low crime rate, its proximity to good schools, the distance to amenities such as shopping centres and entertainment venues, access to public transport and access to freeways.”
This one-bedroom flat in the heart of Rondebosch Village, for sale at R1.1 million, is an excellent option for a first-time buyer.