A new FNB study points to a strengthening in the Western Cape’s ability to attract repeat home buyers, while Gauteng appears to be moving in the opposite direction.
At 17.4% of its repeat home buying, no other province’s net inflow of repeat home buyers comes close to the Western Cape, according to the bank’s Repeat Home Buyer Study for 2017.
“We believe that the further acceleration in net inflow of repeat home buyers in 2016 explains much of the Western Cape’s far superior house price growth in 2016,” said John Loos, household and property sector strategist at FNB.
“Given that many people vote with their feet, studying migration patterns between regions in South Africa can provide a good indication of household perceptions towards regions, perceptions of economic opportunity, lifestyle or how well a region is run perhaps,” Loos said.
Repeat home buyers are those who sell a property and buy another one within a reasonably close time period to each other.
The inter-provincial repeat buyer migration picture shows 2016 to have been another year of increase in the rate of inter-provincial migration. From 12.8% of total repeat property buying being estimated to be inter-provincial repeat buying in 2015, the estimate rose to 16.1% in 2016, FNB said – significantly higher than the 6.2% lows reached in 2009/10.
FNB said that the Western Cape has greatly enhanced its appeal to repeat home buyers over the past decade relative to many other regions of the country. It continues to be viewed as a popular ‘semi-gration’ destination.
The province has by far the strongest net inward migration (inward migrating repeat buyers minus outbound ones) rate of repeat buyers from other provinces.
“The City of Cape Town and surrounding areas has the benefit of a perceived high quality lifestyle compared to many other of SA’s cities, and it is this combination of good economic opportunity along with lifestyle that appears to be proving to be the winning recipe,” Loos said.
FNB noted that the country’s other major provinces – Gauteng, KZN and the Eastern Cape – find themselves with net outward migrations of repeat buyers for much of the time, although the Eastern Cape moved into very slight net inward migration in 2016.
“Net outflows are something that one would think may not bode well for those regions’ future economic growth rates,” said Loos.
The Net Inflow of Repeat Property Buyers to the Western Cape has become nothing short of spectacular, measuring a staggering 17.4% of the province’s total repeat buying, having accelerated steadily since 2009, and even more sharply from 2015’s 10.6% of repeat buying.
This net inflow percentage now dwarfs the net migration rates of the other 8 provinces.
On the other hand, Gauteng’s net outflow of repeat home buyers picked up speed to an estimated -9.1% of total repeat buying in that province. This is a significantly larger net outflow from 2015’s estimated -2.9%.
“This should be a cause for some concern, as much of this migration is the highly skilled and more affluent part of the labour force, and it takes with it significant skills and purchasing power away from the country’s largest provincial economy,” Loos said.
The property analyst noted that while Gauteng is not a good attractor of incoming repeat home buyers from other regions, its overall skills attraction and retention situation is not as bad as the repeat home buyer migration estimates may appear.
“Our reasoning is that we believe that a significant portion of departures of repeat buyers from Gauteng are for non-work related reasons, i.e. retirement and lifestyle,” Loos said.
He added that Gauteng also benefits more from inward migration of aspirant first time buyers in the early stages of their working life, than do the smaller provinces, due to that province still being by far the largest provincial economy and thus the major place of economic opportunity for new labour market entrants.
FNB pointed out that for Gauteng, the Western Cape is the most popular destination for its ‘semi-grants’, with 56.2% of its outbound repeat home buyers heading for that province in 2016.
Of the Big 4 provinces, the other one whose ‘semi-grants’ favour the Western Cape are those from the Eastern Cape, with 53.6% of that province’s outbound repeat home buyers heading for the Western Cape.
KZN, however, saw 46.64% of its outbound repeat buyers heading for Gauteng in 2016, making Gauteng still their most popular destination, followed by 34.77% of its outbound repeat buyers heading for the Western Cape.
For outbound repeat home buyers from the Western Cape, Gauteng remains the most popular destination, with 45.88% of this group headed there in 2016, followed by 21.82% headed to the Eastern Cape, FNB said.