Although national house price growth currently reflects a gradual and modest easing – while still remaining ahead of inflation, the past year has seen a robust residential property market maintain its ongoing resilience despite South Africa’s sluggish economy and other global economic impacts.
There are a number of trends, which characterise this period, with some still very much in evidence as we reach Q4 in 2015. First and foremost this includes a shortage of stock and an abundance of homebuyers – particularly in major centres, commercial hubs and other high demand areas around the country.
This is along with a strong rental demand across the board, with every segment of the market active and experiencing a shortage of rental stock, with an oversupply of would-be tenants and as a result, increasing rental yields.
As is the case globally, densification and urbanisation are becoming increasingly evident as households move to economic nodes along public transport corridors to avoid traffic congestion and young professionals gravitate towards city centres. This is accompanied by the continued trend towards a desired ‘live, work, play’ lifestyle, as seen in examples such as Melrose Arch, Steyn City and Park Central in Gauteng, Cape Town’s vibrant central city and the Gateway precinct in uMhlanga in KwaZulu-Natal.
House prices within the country’s major metropolitan areas continue to good capital growth, registering healthy growth rates with pockets of excellence such as Cape Town Metro which has experienced house price growth in excess of 20 percent over the past year to date. Limited land availability within these areas, combined with rapid urbanisation and migration between metros – with a steady influx of people seeking economic opportunities, are contributing to a steady increase in metro house prices.
An exponentially increasing aspiration among home owners to seek residences with lower overheads and energy-saving features in order to reduce utility and other monthly costs has seen the demand for sectional title units ie apartments and townhouses, grow in comparison to freehold properties. Confirming the national trend towards downsizing to more manageable homes, the number of flats and townhouses built has also risen, brought to market by developers who continue to demonstrate confidence in the marketplace, following their return after a long absence in the wake of the 2007 global financial crisis. This has resulted in a healthy recovery in the number of new units being sold.
As the revival in the residential property market has become more entrenched, it has precipitated the return of the holiday buyer, with many capitalising on the opportunities for sound value for money presented in the market. For most leisure buyers, the coastal lifestyle – whether for permanent residence or holiday getaways – represents easygoing, fun living with sun and sea – free of traffic, pollution and the crime often associated with large cities.
Notably, the last time that coastal areas enjoyed a price premium over non-coastal regions was during the 2004 residential property boom. The coastal premium then re-emerged in late-2013 – a trend that continued into 2015. In the face of an ongoing supply of leisure properties, the sector has clearly benefited from renewed interest among cash-flush buyers.
By Dr Andrew Golding