Drought could damage property market

FOR AS long as the Western Cape’s water situation remains unresolved, the property market could take a knock in the short term and first-time buyers could face even higher prices.

Added to this, the influx of property investors from Gauteng and KwaZulu-Natal is expected to be slow.

Tony Clarke, managing director of the Rawson Property Group said there had been little evidence that the drought would affect Cape Town’s buoyant property market.

He however admitted it would be naïve to assume things would continue as normal after Day Zero.

“If we take the middle to upper end of the market, for example, I do think sales will start to slow. Se-migration, a huge driving factor in this segment over the last few years, is unlikely to continue at the same rate until we resolve our water situation. That means we’re not going to have as many affluent Joburgers and Durbanites driving demand for luxury property, and prices could take a slight knock in the short term.”

While the market remains strong for now,

there are other risks added to the issue. “We’ve seen double-figure capitalisation in Western Cape property over the last two years and that kind of growth isn’t typically sustainable.

“Left unchecked, there’s a risk that property values would lose touch with their underlying economic fundamentals, and we’d end up in a bubble situation, something we definitely want to avoid,” he said.

He does not, however, believe the situation will be as dire as many predict.

Clarke said entry-level properties may not see the same normalisation effect as their more expensive counterparts.

“In fact, first-time buyers in the Western Cape may face even higher prices thanks to the water crisis.

“The first is the likely influx of people that we’re going to see coming to Cape Town to look for work, as our outlying rural and agricultural areas take strain.”

Richard Day, Pam Golding Properties national general manager and Cape regional head said: “It’s too soon to say whether the water crisis will materially affect buyers’ decisions to relocate to or buy in the Mother City.

“It all depends on the intensity and duration of the water situation.

“A contained situation for a few months will not impact the longterm desirability of living in Cape Town, but a prolonged situation would temporarily impact sentiment and valuations in the short term.”

Deon van Zyl, chairman of the Western Cape Property Development Forum said: “For now things are still good, but we expect that it might change for the worse as the industry is water dependent.”