A new FNB study points to a strengthening in the Western Cape’s ability to attract home buyers from other provinces while retaining its own residents, despite affordability challenges.
Gauteng, meanwhile, faces challenges of its own – holding onto repeat buyers. FNB noted that for the country’s largest formal housing market, the percentage of repeat buyers leaving Gauteng for the Western Cape has skyrocketed from a lowly 0.8% of Gauteng repeat buyers in 2009 to 9.1% by 2016.
The percentage of Gauteng repeat buyers leaving that province for KZN, by comparison, has only risen from 0.6% of total Gauteng repeat buyers to 1.9% by 2016 – and those with the Eastern Cape as a destination from 0.2% to 1% of total Gauteng repeat buyers over the same period.
According to household and property sector strategist at FNB, John Loos, the Western Cape has developed a competitive advantage, which appears reflected in its having the lowest percentage of repeat buyers leaving the province, i.e. 7.6% of total repeat buying in the province, as well as by far the strongest net inward migration rate of repeat buyers from other provinces.
“This should not come as too much of a surprise. The province’s economy is, along with Gauteng, arguably the most developed and diversified into more modern services industries, and had the second fastest average annual economic growth rate from 2011 to 2015, only marginally behind Gauteng.
“In addition, 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 in attracting both wealth and skills to the province in relatively abundant quantities,” Loos said.
The Net Inflow of Repeat Property Buyers to the Western Cape has become nothing short of spectacular, measuring 15.7% of the province’s repeat buying, having accelerated steadily since 2009, and now dwarfing the net migration rates of the other eight provinces, FNB’s report said.
By contrast, Gauteng and KZN find themselves with net outward migrations of repeat buyers for much of the time, while the Eastern Cape had only a very slight net inward migration in 2016, FNB said.
“Net outflows are something that one would think may not bode well for those regions’ future economic growth rates,” Loos added.
“The trend should be of concern for Gauteng in the sense that it may battle to maintain its status as the fastest growth economy over the longer term should the net outflow of repeat buyers, along with their skills and purchasing power, continue to deteriorate further,” the property strategist said.
Loos stressed that first time buyer data suggested that Gauteng continues to attract young skilled labour market entrants moving to the region to start their careers.
“In addition, Gauteng’s superior home affordability can boost such a young buyer inward migration,” he said.
The Western Cape, on the other hand, while still experiencing something of a golden era, needs to be concerned with finding a solution to deteriorating home affordability, Loos said.
“This provincial economy is a services dominated one, heavily reliant on skills attraction and retention. To sustain this net inflow of repeat home buyers while retaining more financially constrained 1st time home buyers, the region has to find ways to utilize land more effectively to create greater residential affordability, while also finding a solution to rapidly mounting traffic congestion.”