Buyers seeing value in Western Cape’s housing market
There’s value to be had in the Western Cape’s dynamic property market. Just ask the numerous buyers who are still choosing this province for their primary home or investment property.
Of all the bond applications processed in the Western Cape by home loans originator ooba, just over 84% were for permanent homes, compared to the 94% processed nationally – with a higher percentage of home applications being processed in the Cape for investment purposes. While there has been a marginal increase in the percentage of home applications for investment purposes around the country, in the Western Cape there has been a significant rise from 11.1% to 19.4% between January and December 2019 – resulting in an average of 15.2% of all homes sold in the Cape last year being purchased by investors compared to just 5.7% of all homes sold nationally.
This is, in part, due to the message being relayed that the Western Cape is open for business. In fact, trade and investment agency Wesgro recently launched an Investor Confidence Campaign to highlight this province’s considerable growth potential. Speaking at the launch, MEC for economic development and tourism, David Maynier, said: “The latest available information shows that investor confidence in the Cape Town city centre remained high during 2018, with the most significant indicator of investor confidence in Central Cape Town being the growth in property value of more than R12.2 billion from 2016/2017 to 2018/2019.”
The Western Cape has a much lower percentage of first-time homebuyers, according to ooba, accounting for 38% of home loan applications in the past year compared with the 50% received nationally. Yet, the recent drop in the repo rate, coupled with financial institutions’ appetite to offer preferential rates as part of their extended mortgages, is creating a fertile climate for first-time buyers, with a growing percentage applying for home loans in the Western Cape, reports ooba.
There has also been a 5.1% increase in the approval rate of 100% home loans nationally over the past year, says Kay Geldenhuys, Head of Sales Fulfilment at ooba, In fact, more than 60% of all applications received by ooba home loans are from buyers who have no access to a deposit. And over 80% of these applicants are being approved for finance, with four out of five successfully securing a 100% bond.
Although the average price for first-time buyers in the province is higher than the average purchase price nationally, the price correction being seen in many areas has certainly encouraged more new buyers to invest in property, says Sandra Gordon, Pam Golding Properties senior researcher.
So, given the welcoming lending environment for homeowners, who is currently buying? Most of the bond applicants in the past year were about 40 years old, according to ooba, with the average age of first-time buyers in the Western Cape being 35. Also, the average age of applicants buying a property with others was slightly lower, at 34. Interestingly, the average price paid by a first-time buyer in the Western Cape was, at R1.3 million, significantly higher than the national average for first-time buyers of R0.95 million. There’s also been considerable interest in the Western Cape from South Africans living abroad, who feel that now is a good time to invest in property at home.
Sales activity has been particularly brisk in the lower price bands, fuelled in part by the introduction of an all-inclusive bond for homes of up to R1.8 million, says ooba. Lindsay Beck, Pam Golding Properties branch manager for the Southern Suburbs, says that homes that are correctly priced are selling well. A property in Southfield that was recently sold for R1.4 million at the start of the year attracted more than 300 enquiries when it was listed through Pam Golding Properties. “The buyers are there, but they are particularly interested in homes within the right price range,” says Beck. Similar trends can be seen in other areas, such as the Atlantic Seaboard and Southern Peninsula.
This is not to say that sales at the upper end of the market have stagnated, adds Gordon. Properties that are priced at market-related values, in desirable areas, are the ones that sell.
Posted by Anel Lewis