Positive activity in key property markets

Despite intensifying political and economic uncertainty, and slowing national house price inflation, there is still positive activity in key property markets around the country, according to Pam Golding Properties.

The group reported sales of R20 billion across 300 offices for the financial year ended in February. The Western Cape is still the top performing provincial property market with an 8.8% year on year inflation rate in March – considerably higher than the national inflation rate of 4.2% for the same period.

Semigration remains a strong driver of house prices in the province, with agents reporting substantial interest from Gauteng buyers, either wanting to relocate with their families or to set up corporate accommodation. Cape Town retains its slot as the top performing metro, recording an inflation rate of 14.3% in December 2016, comfortably ahead of the other metros.

“The Mother City is racking up the global awards and was recently recognised as a major technology hub when it was ranked 22nd among the world’s top tech cities in the Savills Tech Cities report. Although the city has long been regarded as one of the most beautiful to visit, these accolades also show that Cape Town is open for business, and ripe for investment. It is also becoming a sought-after corporate destination, with companies such as British American Tobacco SA setting up headquarters in the Waterfront’s new canal district,” says Pam Golding Properties CEO, Dr Andrew Golding.

Research by FNB household and property strategist John Loos, based on Deeds Office data, highlights five areas that have outperformed average house price growth across the metro over the past five years: The Atlantic seaboard, City Bowl, suburbs just outside the city centre such as Woodstock, Salt River and Pinelands, the southern suburbs and the southern peninsula.

The sectional title market nationally remains buoyant, attesting to the growing first-time buyer market and increased trend of downsizing. According to the PGP Index, smaller sectional title prices remain resilient, with a 5.5% year on year price increase in March, while prices of larger freehold properties continue to slow.

There’s also been a significant boom in development, particularly in the City Bowl but also in residential markets in the southern suburbs and Atlantic seaboard. In the City Bowl, where a rapidly growing residential population is pushing up the demand for accommodation, 16 on Bree comprising 350 units sold out in just two weeks.

Golding says the price of units in this area has spiked considerably, given the demand for a live-work-play lifestyle with the convenience of city living, from about R4 000/m2 in 2004 to the current average selling price of R55 000/m2.

Laurie Wener, Pam Golding Properties senior executive for developments Cape Town, says people are prepared to pay a premium for new units with delivery between one and three years.

“These developments are appealing to those wanting sound medium to long term investments. The percentage of new mortgages issued by ooba for the purchase of investment properties has risen from 3.3% of total sales in early 2016 to 5.9% in March 2017,” says Wener.

On the Atlantic seaboard, property prices continue to rise, says Basil Moraitis, Pam Golding Properties Atlantic Seaboard area manager.

“In Camps Bay, for example, the average property price has escalated from R3.75 million in 2010 to R14.1m this year. And this escalation can be seen in other Atlantic seaboard suburbs as well. Apartments in Clifton hit the R140m mark in the past year, and a bungalow was sold for R50m, despite needing considerable renovation,” he says.

“The demand for property along the Atlantic seaboard shows no sign of ebbing, especially as Brexit and the largely favourable exchange rate make it possible for overseas investors to buy property that affords them a lifestyle comparable with Europe and other popular international destinations. In Hout Bay, while sales of properties in the lower end of the market have been sluggish, sales of houses priced at over R8m have doubled in the past year.”

There has also been a turnaround of sales in the southern suburbs. Whereas for the past three to four months most of the sales were in the R10m and below price bracket, agents are now reporting a growing number of sales in the top end of the market, with a home selling in Rondebosch for R15.5m; the highest recorded sale in this suburb to date. There have been sales in Bishopscourt ranging from R24m to R36m and many of the sales in this bracket are to cash buyers.

The western seaboard is one of the faster growing areas in South Africa and in the past two decades new suburbs such as Century City, Royal Ascot and Parklands have been established.

“Parklands has now expanded across Sandown Road and development in this area continues unabated,” says Emarie Campbell, Pam Golding Properties area manager for the western seaboard.

“Prices in this area average at R2.5m with an entry level home selling for around R600 000. Homes in the top end can sell for up to R15m. About 60% of the sales in this market are cash and the western seaboard’s sales for the financial year under review was R610m.”

The South Peninsula has also shown significant house price escalation, and Sandi Gildenhuys. Pam Golding Properties area manager, says house prices in suburbs such as Kalk Bay, St James and Noordhoek have increased significantly.

“Three properties on Boyes Drive and other prime areas were on the market for between R11.5m and R12.5m. Prices have been steadily climbing since May last year, in part because of the near completion of the road refurbishment in Kalk Bay, but also because of buyers relocating from Gauteng and other provinces. There are also “swallow” buyers who live in the United Kingdom, France and Germany but choose to spend a few months of the year at their seaside home,” says Gildenhuys.

The Western Cape rental division has concluded numerous notable leases during the 2016/2017 financial year for flats and houses in the Atlantic seaboard, City Bowl and southern suburbs.

Pam Golding Properties rental manager for the Western Cape, Cape Metro, Dexter Leite, says there has been considerable growth across all markets, underpinned by the strong demand for rental property largely due to the continued migration to the Cape from other provinces.

Golding says the announcement by Treasury that the threshold for transfer exemption has increased from R750 000 to R900 000 will have a significant impact on the market, especially for first-time buyers.

“Positive activity in this band of the market will influence demand and prices in higher bands as prospective home-owners move up the property ladder. Our research shows that the buyer activity in the under-R1m band continues to outperform the national market, as the demand for housing in this affordable price bracket continues to increase,” says Golding.

“Pam Golding Properties has also been busy with international property transactions and in the past 18 months, almost 100 transactions worth €70m have been concluded in Portugal alone. Most of these buyers were South Africans, who continue to be interested in off-shore property destinations including Seychelles, Mauritius and Europe, especially if these are coupled with residency and/or citizenship opportunities and visa programmes.

“In conclusion, while there are local and international reasons to be conservative in formulating predictions for the year ahead, current trends indicate that the South Africa residential property market remains resilient and, provided there are no excessive shocks to the system, will continue to provide value for local and international buyers,” says Golding.