Weekend Argus (Saturday Edition)
A rollercoaster year for property
Despite national volatility, the Western Cape has emerged relatively unscathed
THE WESTERN Cape’s property market has emerged victorious from a year that has been tough and volatile for the country as it rode the rollercoaster of economic and political instability.
Credit ratings downgrades, affordability challenges, and political leadership battles made the property sector a difficult one to navigate in 2017, but as the year draws to a close, experts believe the words “strong” and “resilient” are best used to describe the performance of the local market.
The growth rate of house prices in Cape Town has been double the rates of the rest of the country, and at last count, was about 8% compared to a national average of 4%, says Erwin Rode of Rode & Associates. This is down from a high of 12% earlier in the year though, showing that affordability is seemingly having an effect on growth.
“The growth rates differed widely between neighbourhoods, with the upmarket neighbourhoods on the Atlantic coast and in the City Bowl performing best as these are areas where little new supply can be added.”
The Western Cape’s strong house- price inflation is largely due to the ongoing semigration of, particularly, older and more affluent buyers from Gauteng and KwaZulu-Natal, says Richard Day, Pam Golding Properties’ national and Cape general manager. This is despite South Africa’s 2017 having been “tumultuous” and “marked by socio-economic uncertainty”.
“This has also been evident in the property market where we have seen a wait-and-see attitude from buyers and sellers ahead of potential changes to the political leadership at the end of the year. Yet, for many, property is still seen as a safe asset, and in the Western Cape market particularly we have seen pockets of significant strength.”
The easing of the interest rate by 0.25% in July was also good news, especially for first-time home- owners. Unfortunately, the national picture was not all pretty as credit rating downgrades and the weakened economic and political outlook put downward pressure on the market, says Seeff Properties chairman Samuel Seeff. The decline in performance was particularly prevalent from March onwards. Overall, the market is down by about 15% to 20%, although there are marked suburb, area, and city differences.
In agreement is Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, who says 2017 has been “annus horribilis”.
“It was certainly a buyer’s market and if one looks at the prices year to date, average national property prices are only fractionally higher than the pre-global economic meltdown a decade ago.”
Cape Town, however, was the only city that remained solidly in positive equity territory.
Seeff adds: “The Western Cape continues to be the best performing area, boosted by the fact that demand does not just come from local residential and investment buyers.”
He says the Western Cape market differs in that it benefits from many other sources of demand on top of local demand. These include semigration, the demand for holiday home rentals and buys, and demand from foreign buyers.
“It should be noted too that because of the high demand for holiday and residential holiday accommodation, there is also a strong demand for buy-to-let investment in the Cape metro.”
Although FNB has reported that semigration to the Cape has slowed, this is largely due to upcountry people being unable to sell their properties and therefore not able to relocate, even though they want to, says Seeff. Prices are also a challenge, so while there is a desire to buy, upcountry buyers need to pay more here compared to the value that they will get in Joburg or Pretoria for example.
The local market definitely “bounced back” this year, agrees Dogon Group Property’s Denise Dogon.
“The property market in 2017 proved to be another good year, although it came to a near shutdown at the shock announcement of South Africa going into junk status. However, like the rand, it too bounced back.”
And it is not only the Atlantic seaboard experiencing sales success. The Dogon office servicing the southern suburbs experienced a 55% overall increase in sales compared to the previous winter.
However, Dogon admits that buying confidence does tend to dip during political upheavals, and due to a few of those this year, there were some related “lowlights”.
However, through it all, Cape Town’s property market put in a strong and respectable performance and is expected to close with average house-price growth figures, says Mike Greeff, chief executive of Greeff Christies International Real Estate.
The two most expensive markets, the Atlantic seaboard and the City Bowl remained the star performers with quick selling times and impressive house-price growth.
“Since 2012, Western Cape houseprice inflation has measured 53.7%, which is significantly more than its closest competitor, KwaZulu-Natal, which achieved 30.2%, or Gauteng’s 24.7%.
“Cape Town’s southern suburbs offered strong results with 14.7% year-on-year growth and the ‘near eastern suburbs’, which include Salt River and Woodstock, at 13.5% growth.”
But the negative aspect to the increase in property prices is that previously “affordable” areas have shown significant price growth and have therefore highlighted the affordability challenges facing firsttime buyers, Greeff adds.