Fresh drivers for SA housing market as it adjusts to new ‘economic realities’

Fresh drivers for SA housing market as it adjusts to new ‘economic realities’

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South Africa’s housing market is undergoing a change, with the old “driver”, namely the Western Cape – while still performing well – being replaced by new “drivers” in Gauteng and KwaZulu-Natal, according to Dr Andrew Golding, chief executive of the Pam Golding Property group (PGP).

“The national housing market overall has had to contend with economic and political headwinds. The relative outperformance in the Western Cape was, to an extent, achieved at the expense of the rest of the national housing market – with semigrants selling their homes in Gauteng and relocating to the Cape, for example,” says Golding.

Another trend he notes is that areas of growth in the market are now not necessarily the well-established high-end suburbs, but rather the more affordable areas, which are not out of the reach of less affluent buyers.

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Furthermore, there are areas still seeing increased activity, for example, towns formerly considered holiday towns which are now attracting permanent residents – such as those along the Whale Coast and Garden Route.

Economic realities

“The current market slowdown is primarily one of the top-end and the Western Cape, understandably cooling after running ahead of economic realities. It is now the turn of the more affordable, less popular towns and suburbs to recover,” says Golding.

“The housing market has felt the effects of the deteriorating economy – with house price inflation slowing from 4.72% in December 2017 to 3.99% in September 2018. National house price inflation averaged 4.87% last year compared to an average of 4.37% during the year to date.”
 
Regionally, in terms of house price inflation, the Western Cape continues to slow. It was 7.95% in September. However, Golding says the region’s prices are still rising at double the pace of the rest of SA, while KZN house price inflation is currently 4.27% and in Gauteng 2.83%.

Golding points out that the East Rand is currently recording the strongest recovery among the Gauteng metro housing markets.

According to the PGP Index, the upper price band above R3m remains the weakest, while the lower price band below R3m continues to see house price inflation accelerate.

Despite an ongoing demand for convenient, lock-up-and-go sectional title apartments, freehold homes still remain by far the largest new property type being built.

Yet, according to Lightstone, the number of South Africans buying freehold homes has been steadily decreasing – with buyers opting for sectional title and estate homes instead.

Increased security, affordability and the communal lifestyle are all alluring aspects when potential buyers consider apartments, according to Golding.

READ: What Cape Town property owners should learn from Johannesburg valuation hikes – experts

Geographic changes

Data shows the general make-up of homes has changed in the Cape, KZN and Gauteng over the past five years.

In the Western Cape, the highest sales in estates are generally located in the Northern Suburbs while Strand has seen sectional title sales increase from 40% of sales to 52% of sales. All towns have seen an increase in sectional title sales as a percentage of total sales.
 
In Gauteng, a substantial increase in estate sales has been seen in Centurion in recent years. All towns have seen an increase in the percentage of sales which sectional title properties account for, with particularly large increases recorded in Midrand, Randburg, Roodepoort and Sandton.

In KZN, estates have become more popular in most towns across the province.

With growing congestion and the rising cost of fuel reducing the distance that people are willing to travel each day – there is a strong desire to live close to work, schools and retail.

This can either be achieved by living in an estate, or by living in a growth node which offers all these facilities, says Golding.

He says Johannesburg, Cape Town and Durban all have one thing in common – each of these major metros has experienced burgeoning growth with the establishment of huge new nodes to the north of the cities – a trend which continues to gather momentum.

“Certainly, as John Loos of FNB has pointed out, containing rising costs such as electricity will be an increasingly important factor for homeowners moving forward,” says Golding.

“The threat of renewed load shedding and the prospect of a water crisis in Gauteng suggest that homes with solar panels and other means of reducing energy and water usage will prove increasingly appealing to home buyers, as well as low-maintenance properties with lower monthly running costs.”

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