COOLING CAPE TOWN PROPERTY MARKET HAS POSITIVE SPIN OFFS
The experts outline the facts
Tuesday 24th of July 2018
While house prices in the Cape metro have run ahead of other cities for a long time, this gap is steadily closing. This, in fact, is a good thing, say the experts and in no way cause for alarm.
“This price correction should be viewed positively for the market,” says Richard Day, Pam Golding Properties Group General Manager. “After more than a decade of accelerated house price growth, especially in areas such as the Atlantic Seaboard where property prices increased by 650% in the past 15 years, what we are seeing now is a natural price adjustment.”
Still a dream destination to live or invest
The facts remain. The Western Cape is still one of the most desirables place to live and invest in the world. Overall, as a region, it is still the number one performing market in South Africa boasting a 10.6% price increase from January to June 2018 (PGP Index) against a national average of only 4.25%.
Amongst the positive spin offs, the cooling of prices in the metro’s hot spots has had the associated benefit of boosting the market in other parts of the region. Even close to the City Bowl, house prices in areas like Observatory and Woodstock, are showing signs of growth.
Temporary factors that emphasis overall perception
Basil Moraitis, Pam Golding Properties area manager of the Atlantic Seaboard, notes that the recent price stabilisation is no surprise given the unsustainable rate of inflation over an extended period. Add to this the concerns over water scarcity and the quieter winter selling period, both of which are temporary, but contribute to emphasis the price correction.
“With a mountain and coastline to hinder over-development, property along the Atlantic Seaboard will always be in demand. We see this as new developments continue to be snapped up by investors and buyers seeking an urban-coastal lifestyle,” says Moraitis.
Affordable city apartments are still in demand
The trend for an urban live-work-play lifestyle in the city of Cape Town is still on an upward spike. According to a 2017 Cape Town City Improvement District (CCID) report, property development in the planning and construction phase, set for 2020 completion, is estimated at R14.3 billion. They also report that reasonably priced units in the city are highly sought after. Even though the average time spent on the market has increased slightly to 58.6 days, there are still properties that sell within a week of listing, indicating that the market continues to be buoyant when the price is right. Last year, residential unit prices showed a year-on-year percentage increase of 18.5%, however average price of the units sold during the first half of 2018 was R2.33 million, down slightly from the overall average sales price in 2017 of R2.769 million.
It’s not a time to test the market
Buyers are still buying and tenants are still renting says, says Emarie Campbell, Pam Golding Properties area manager for the Western Seaboard.
“The main thing is that properties that are at market-related prices will sell. This is not the time for sellers who are not serious to test the market. An oversupply of incorrectly priced stock will worsen the surplus and ultimately affect house prices,” says Campbell.
Reasons and solutions for a rental oversupply
The expected winter slow down, coupled with new Airbnb and development stock coming onto the market has combined to the oversupply and pressure on the rental market.
“Correctly priced properties that offer the perceived best value, will let sooner,” advises Dexter Leite, Pam Golding Properties’ Cape Rental Manager.
A limited window of opportunity for buyers
Not all segments of the Cape Town market will be as affected by a repricing phase, says Moraitis. Dam levels are more than half full and winter is almost over, which will naturally see the demand for free-standing homes return to normal. The top end of the market, in areas that are not oversupplied by new development stock, are also predicted to pick up.
“So, while the current market offers an opportunity for the astute buyer, it is unlikely to last for very long. The fundamentals of owning a property in Cape Town – such as the enviable lifestyle – remain as compelling as ever, says Moraitis.
Posted by Niki Jackson