6 South African property trends you need to know in 2017

 ·10 Dec 2016
House cost saving bond

Dr Andrew Golding, Chief Executive of the Pam Golding Property (PGP) group, recently revealed the biggest trends in South African property you need to know heading into 2017.

Despite a tough economic year for the country and signs that the country’s property market was losing momentum, Golding noted that the market remained “extraordinarily resilient”.  Specifically, he strength of the housing market can be attributed to the “continued vibrancy of the country’s major metro areas coupled with an ever-growing preference for property as an asset class at a time of extreme financial market volatility”.

These are his top tips looking forward into 2017:

Location, Location, Location

Golding noted that the biggest deterrent for property buyers was not the economy but rather whether where the property was situated.

Citing recent research released by Lightstone, Golding noted that revealed that the suburb in which a property is located is a relatively more important factor in determin­ing how long a property takes to sell than the state of the economy.

“To illustrate this, the Western Cape may have experienced the highest overall growth in  homeowners due to the well described and most significant semigration trend, but the suburb at the top of the pile from an activity perspective is not in the Cape but in Pretoria – with homes in Garsfontein selling within 2.8 months of listing”.

The Western Cape is still king

The Western Cape continue to outperform all other areas of the country in 2016, remaining the top performing major metro housing market in SA. House price inflation in the region has risen by over 10.35%, with “no indication of it slowing down” notes Golding.

This coincides with the start of the semigration of buyers to the Cape beginning in mid-2013, with a significant number of buyers expected to relocate to the province within the coming year.

“But the story of the residential market this year is certainly not only about the Cape”, notes Golding.

“House price inflation in Gauteng has underperformed the national index in recent years, as the subdued economic environment takes its toll on South Africa’s industrial heartland”.

“But despite the relative underperformance of the overall Gauteng housing market, this region is still South Africa’s economic power-house and remains home to half of the country’s high net worth individuals”.

Sectional titles continue to perform better over freehold

“One possible explanation for Gauteng’s relative price underperformance is the fact that the region is better able to meet growing demand for new housing”, says Golding.

“Unlike Cape Town, where the geographic limits created by the coastline and mountains hamper the creation of new housing stock, creating a persistent shortage of stock in prime areas, Gauteng has been able to expand outwards in order to meet housing demand”.

As a result and due to their popularity with first-time buyers the company has seen a continued preference for sectional title properties over free-standing ones.

Gautrain and rapid development across Tshwane

Despite a lull in Pretoria’s house inflation in 2016, development across the Tshwane municipal region has continued at a rapid pace, with many residential areas retain highly active property markets says Golding.

Menlyn specifically seems to be the main point of attraction as Investors are being attracted by the cosmopolitan ‘work-play’ urban lifestyle that is now on offer at these developments.

This growth has been helped the Gautrain which continues to prove to be a major consideration for porperty buyers. The Gautrian expansion is also likely to have effect on other Johannesburg areas, most notably Sandton and Rosebank.

When construction on the new lines begins in 5 years time, Soweto, Mamelodi and the West of Johannesburg are all also expected to see a major boom.

KZN North-Coast Flourishing

KwaZulu-Natal (KZN) is experiencing a modest rebound, with growth in prices rallying from 5.4% in late-2015 to a level of 7.5% in September 2016, says Dr Golding, with no sign as yet that the rebound in prices is losing momentum.

This is primarily due to the continued demand along the northern KZN coastline, with Umhlanga acting as remains a major hotspot with many new beachfront complexes such as the Oceans and Pearls, and estates like Izinga and Hawaan Forest.

In addition the new Sibaya and Dube TradePort precinct will prove to be continous point s of interest for investors heading into the future.

Eastern-Cape rallies

Nelson Mandela Bay has registered average house price inflation of 5.4% during the first half of the year, making it the third highest performing metro area in South Africa. In addition over the last five years, freehold properties have risen by an average of 22.1% in Port Elizabeth and 29.2% in East London.

This is primarily due to A variety of major infrastructural and property developments are currently underway in the Eastern Cape notes Golding.

“These include the recent announcement by the Department of Energy (DoE) that the Coega Industrial Development Zone (IDZ) would be one of the locations for a R25 billion gas-to-power programme, along with the record-breaking R11 billion investment by the Beijing Automobile International Corporation (BAIC) in a vehicle manufacturing plant and the ongoing development in the Bay West area.

“These investments, along with several other property developments in the region, are likely to significantly bolster economic activity and employment creation in the province.

“The massive new wave of economic investment, coupled with a new local government, suggests that the Eastern Cape housing market will experience a renewed bout of growth in the months ahead”.

Sales are up

Despite growing economic issues, Golding noted that the Pam Golding Group saw a 2% uptick in revenue year-over year.

Notably the group significantly increased its sales volumes (units sold) in the R10 million to R20 million price band by 43%, R20 million to R50 million price band by 17%, R5 million to R10 million price band by 15%, below R1 million by 9% and R3 million to R5 million price band by 8%.

In line with national demand, the bulk of sales are in the price band up to R5 million.

 Read: The reason why South Africa’s property market is suffering is simple

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