They’re be­ing frozen out of good life

Cape Town prop­erty be­com­ing in­creas­ingly in­ac­ces­si­ble to first-time buy­ers

Weekend Argus (Saturday Edition) - - PROPERTY -

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.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.