Top market may lose some sparkle
Category The Property Market
This year may be tougher than last for the Western Cape property market as house-price growth subsides and the province grapples with the ongoing drought.
And just like the national picture, struggles associated with affordability and the unstable economy look set to continue into 2018.
House-price growth in the Western Cape, and in Cape Town particularly, has significantly outperformed the rest of the country in recent years, but FNB’s household and property sector strategist John Loos believes this year it will “slow, back into line” with the national market. The province has also seen “significant home affordability deterioration” which has made it especially tough for new entrants into the market. These affordability challenges will “curb demand”.
“On top of that, the Western Cape could experience economic challenges brought on by its ongoing drought (although) much will depend on 2018 winter rain. A weakened economy would further constrain housing demand. In a nutshell, I don’t expect superior house price growth performance in the Western Cape this year, although the province should still remain significantly more expensive than its nearest ‘rival’, Gauteng.”
The key to 2018 for Cape Town will be economic stability, believes Knight Frank residential chairman Anne Porter, and the extent to which the city’s residential market grows will be largely dependent on the degree of volatility relating to key macroeconomic drivers.
“Interest rates, in particular, will affect prices and affordability, but Cape Town will remain the premier market for residential property, although growth will probably be slower in 2018.” Agreeing that the Cape Town market will still perform better than the national average, Kevin Jacobs, broker/owner at Remax Premier, says there will, however, be a “slight slowdown” by up-country buyers due to the drought. But he believes this reduction will be minimal.
As the City Bowl and surrounds become increasingly unaffordable to the average South African buyer, Jacobs believes demand for property in the southern suburbs and the south peninsula will increase. For first-time buyers, properties in the lower southern suburbs, along with the south peninsula, will be sought after. “There will also be an increase in demand for smaller properties with small or no gardens. Pools are a liability. Properties with reliable boreholes and wellpoint water access will attract higher prices.” Urban densification will also be a major movement, meeting the housing needs of a growing consumer base, says Francois Venter, director at Jawitz Properties. Smaller spaces that are close to work and boast top “green” and “smart” technology features will also attract buyers. “In the Western Cape particularly, water-saving features will continue to be a necessity.” Mixed-use developments are already a trend, but Porter predicts 2018 will see the uptake of homes in “urban villages increase exponentially”. Urban villages are also an attractive and affordable option for those wishing to get their foot on the property ladder. “Millennials are drawn towards this live-work-play lifestyle which offers a valuable long-term asset, vibrant quality of life, and reduces commuting time,” Porter says.
Regarded as blue-chip investment areas, the Atlantic Seaboard and City Bowl remain popular and will continue to attract buyers and investors from across the country, says Billy Rautenbach, sales director for Seeff Atlantic Seaboard, V&A Waterfront & City Bowl. The first part of the year is expected to be busier as this is usually when more buyers and tenants enter the market, she says. This year is also expected to be “business as usual” for the southern suburbs, says James Lewis, managing director for Seeff
Southern Suburbs, Hout Bay, and Llandudno. “The excellent schools and proximity to UCT mean the early part of the year tends to be a little busier as people start looking to get into property, either trading up or down. The rental market also tends to be a bit busier.” Cape Town’s mid-market – below R2 million – is traditionally the most active segment and is likely to continue to flourish and be the most well-performing in the market, believes Greeff Properties chief executive Mike Greeff. The trend of investing in real estate as a stable method of wealth generation will also continue. “Densification, which first became prominent after sweeping the southern suburbs, is likely to increase as a trend throughout the province, as people look to own great property with secure lock and go convenience,” Greeff predicts. He says the environmentally friendly trend will continue to gain popularity this year. “Additionally, homeowners and investors are increasingly settling on purchasing homes in secure living estates and this trend is expected to expand in the coming year. “Across the Cape Peninsula, the southern suburbs, the City Bowl and Atlantic Seaboard will always be some of the best areas in South Africa,” he says.
There will also be a constant demand for apartments close to the Cape Town CBD. House- price inflation in the sectional title housing segment is still outperforming full title with the gap between the two widening, says Pam Golding Property Group’s chief executive Andrew Golding. Developers are responding to this growing demand with an increasing portion of all building plans being passed for apartments. Echoing his fellow property professionals, Golding says other trends set to continue this year include densification, multi-generational living, live-work-play precinctsand green homes. “We also anticipate a growing demand for secure estate living, both freehold and sectional title, as well as homes catering for the ever- growing retirement market with those wishing to retain an active lifestyle with access to amenities. “Sectional title apartments also have high appeal for those downscaling due to changing lifestyle requirements.” Porter says: “Cape Town boasts an extremely diverse and innovative environment with a global, cosmopolitan mindset. While it is difficult to predict new trends, one can be certain the city will be the pacesetter with respect to dynamic new ideas in 2018.”
Author: Knight Frank
