Property group Pam Golding has published its annual property market review report, showing how South Africa’s major property markets performed over the past year – and hinting at what lies ahead.
According to the group, the year began on an optimistic note, with high expectations of a positive economic outlook as a result of Cyril Ramaphosa’s election as South Africa’s new president.
However, as the full extent of the economic cost and fallout from years of State Capture became apparent, business and consumer confidence slumped. Growth forecasts were halved (now 0.7%) and the economy unexpectedly slipped into recession during the first half of 2018.
The effects of the economic downturn were not lost on the property market, even those which have historically outperformed.
One of the stand-out findings of the report was that the Western Cape is losing its shine as the leading property market in the country, making way for other areas.
While the Western Cape still outperformed most other markets, Pam Golding noted that it was driven at the expense of other markets, rather than local organic growth.
“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,” it said.
However, the group noted that the South African market is undergoing a period of change in which the old ‘driver’ (Western Cape) – while still turning in an impressive performance – is being replaced by new ‘drivers’ in Gauteng and KZN.
“The areas of growth in the market now are not necessarily the well-established high-end suburbs but currently the more affordable areas which are not out of the reach of South Africa’ numerous less affluent buyers,” it said.
This trend can be seen in several areas – including unit sales in the Western Cape, a figure which is on a downward trend, as well as a drop in house price inflation.
Rentals, too, are trending downwards, while other areas are showing growth.
During the 12-month period under review, Western Cape sales accounted for 24.8% of total sales. The impact of semigration on total sales is evident, Pam Golding said, with the Cape accounting for an increasing percentage of total sales between 2013 and 2016 when it rose from 20% to about 30%.
It has since declined to around 25% – perhaps reflecting the impact of the drought and the deterioration in affordability, the group said.
House Price Sales
Over the same period, unit sales in Gauteng accounted for 42.3% of total sales, where sales have remained steady at between 40-45% since 2010.
KwaZulu-Natal sales accounted for 11.6% of total sales in SA. However, KZN appears to be marginally losing market share – declining from around 13% in 2010 to closer to 11% in 2018.
House Price Inflation
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 (7.95% in September) however the region’s prices are still rising at double the pace of the rest of SA, while KZN inflation is currently 4.27% and Gauteng 2.83%.
Notably, the East Rand records the strongest recovery among the Gauteng metro housing markets.
In recent years, the Western Cape has enjoyed the strongest rental market (with demand exceeding supply by the largest margin). However, in the second quarter the Cape market weakened noticeably.
According to the third quarter FNB Estate Agent Survey, there are some emerging signs that the rental market could be in for a mildly better run in the near term. Affordability issues can put the brakes on a portion of aspirant first-time buyers, who typically will then opt for the rental market.