Billions flowing into Joburg property
Johannesburg’s real estate market has seen an influx of billions of rands, buoyed by the formation of the Government of National Unity (GNU).
After losing its majority in parliament, the ANC formed a GNU with the DA, IFP, PA, FF Plus, UDM, Rise Mzansi, PAC, Al Jama-Ah and Good.
The formation of the market-friendly GNU has been well received and has brought a sharp increase in business and investor confidence in South Africa’s economic prospects.
Rory O’Hagan, principal of the Chas Everitt Hyde Park & Sandton branch, said the group had sold more than R800 million worth of homes in Johannesburg’s northern suburbs in the past seven months.
“We have noted increased property demand in our area – and right across Gauteng – since the beginning of the year,” O’Hagan said.
“And this is clearly reflected in the latest Absa Homeowner Sentiment Index (HSI), which shows that overall confidence in the Gauteng property market rose from 64% in the second quarter of 2023 to 72% in the same period of this year.”
“But the GNU has really boosted interest among both local and foreign investors and resulted in a significant upturn that has taken this office from a monthly average of R100 million in sales earlier in the year to over R150 million a month in June and July – with the majority of those transactions being in the R2-R5 million and R5-R10 million ranges.”
He added that the value currently available in the Johabbesburg market is a major driver of sales, with buyers and investors expecting rising demand and rapid price decreases when interest rates decrease from September.
“At the moment, it is definitely a buyers’ market, with lots of stock, sellers willing to negotiate and prices at 2018 or 2019 levels, thanks to below-inflation growth for the past five years.”
“And that is obviously very attractive to prospective buyers still battling the effects of high inflation and high interest rates, as well as investors who are preparing for an improved rental market in Johannesburg as SA’s economic fortunes improve.”
Over the last five years, the Covid-19 pandemic, semigration, load shedding woes, and infrastructure challenges have meant that Johannesburg’s market has lost out heavily to Cape Town.
This can be seen in Stats SA’s latest Residential Property Price Index (RPPI), with Western Cape prices rising by an average of 7.7% in the year ended March, while prices in Gauteng rose by a mere 0.7%.
Property data company Lightstone also noted that while Gauteng currently accounts for 35% of all residential sales in SA, these sales are only worth 37% of the total value. The Western Cape, on the other hand, accounts for 30% of the total value of sales but only 18% of sales.
“However, Johannesburg is still the financial heart of SA and home to most of the country’s top companies and multinationals, so it benefits most as the economy picks up and more jobs are created.”
“And already, we find that most of the expat and foreign buyers coming into the SA market now are choosing Gauteng as their base, because it offers them the best employment and business prospects as well as much less expensive properties.”
“Meanwhile, comparative value is playing a significant role in also attracting buyers back to Gauteng from the Western Cape in the process we call reverse semigration – and in a sharp reduction in semigration from Johannesburg and other inland areas to Cape Town and other coastal areas that became popular following the Covid-19 pandemic.”
“Indeed, the Absa HSI shows that confidence in the Gauteng market is currently higher than that in the Western Cape market for the first time in many years. What is more, many other South Africans are moving to Gauteng.
The Migration Report from Stats SA shows that Gauteng accounts for 52% of all job opportunities in South Africa and thus attracts many migrants from other provinces. Close to a third of the region’s 16 million residents are from other parts of South Africa.
“And with so many of these migrants being young job seekers or entry-level employees who most likely won’t be buying homes for some time, the region also offers property buy-to-let investors excellent prospects for the foreseeable future.”
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