South Africa’s residential property market is valued at a cool R4.5 trillion

In the years since the 2007/08 global financial crisis, the South African residential property market has recovered slowly, while market activity has remained relatively flat. Nonetheless, the total value of sales in the local housing market increased steadily during the past year, rising by 8.3% from year earlier levels.

According to Lightstone, there are 6.3 million residential properties in South Africa, valued at R4.5 trillion. Half of these properties are located in the Western Cape and Gauteng, accounting for more than two-thirds of the total residential-market value.

While the Johannesburg housing market remains stable, Cape Town is showing much stronger growth than all other metros – with a 12.3% increase in the total value of property transactions last year. This is at least partially attributable to Gauteng homeowners increasingly choosing the Western Cape when buying residential properties outside their province, often with the intention of eventual relocation.

“total value of sales in the local housing market increased steadily during the past year, rising by 8.3% from year earlier levels”

Research by Lightstone reveals that since 2010 there has been an upward trend of Gauteng residents buying properties in the Western Cape, mostly in coastal suburbs. There has been a steady increase in this ‘semigration’ over the last five years.

Another key trend identified by Lightstone is the growing preference for estate living, largely because of the associated security and lifestyle-convenience aspects. Over 50% of estates are located in Gauteng, with a further 25% in the Western Cape.

Estates currently account for just 5% of total housing units in South Africa, but 15% of total property market value. This reflects the fact that the average price of an estate home is R2 million, almost three times the national average of R700 000 for a home. The total value of housing stock in estates across South Africa is now close to the total value of all residential properties in Johannesburg.

The estate housing market is generally less volatile than the rest of the luxury market, according to Lightstone. As a result, estate house prices are expected to outperform the luxury market during the current period of sub-par economic growth. Investing in an estate home is thus a far safer bet in current market conditions.

While conceding that the residential property market is slowing – in line with the overall economy – Lighstone notes that there are still “hot spots” in the property market. Location is thus the top defence and potential buyers must research this meticulously.

Finally, Lightstone notes that although household income is under pressure, property investment remains a top priority for many South Africans.

Posted by The Know - Pam Golding Properties