Eastern Cape’s housing market shows remarkable resilience

The housing market in the Eastern Cape continues to prove extremely resilient, experiencing ongoing strong demand and accelerating growth in prices which is outperforming other coastal regional housing markets. This is even as national house price inflation, and house price inflation in the major regional housing markets, continues to slow from a mid-May 2021 peak, reports Pam Golding Properties.

Data from Lightstone shows that while national house prices rose by 4.5% during the first five months of the year (Jan-May 2022), prices in the Eastern Cape rose by an average 8.0%. (Lightstone’s latest available data).

Source: Lightstone

Illustrating just how resilient the market has been during the pandemic, and adjusting for the impact of Covid by averaging sales in 2020 and 2021, Gqeberha recorded total sales of 8 732 (Lightstone statistics) or 4 366 sales each year, which is the highest level of sales recorded since 2014. Meanwhile in East London, sales during 2020 and 2021 totalled 3 450 or 1 725 each year – the highest level since 2012, also demonstrating notable market resilience in the face of the economic challenges created by Covid.

Says Justin Kreusch, Pam Golding Properties area manager in Gqeberha: “The Eastern Cape is certainly well positioned to attract new home buyers looking to escape expensive, congested cities for larger, more affordable homes and a more relaxed lifestyle. This shift in homebuying patterns in the wake of the pandemic may well be contributing to Nelson Mandela Bay’s strong growth in prices over the past 18 months. In terms of price appreciation, during the first five months of the year (latest data), house price inflation in NMB averaged 9.0%.” (See chart below).

Source: Lightstone

According to Pam Golding Properties research analyst, Sandra Gordon, while in both Gqeberha and East London housing stock is predominantly freehold, the percentage is higher in East London at 89.3% compared to Gqeberha’s 72.8%. While neither metro has a substantial number of homes located within estates, East London has a slightly larger percentage (7.8%) compared to Gqeberha (5.6%). The latter has a significantly larger housing market, with an estimated 90 869 homes, compared to 53 356 homes in East London, according to Lightstone.

Gordon says with the exception of the years during the pandemic, the prices of freehold homes in both towns have closely tracked each other since 2013. Notably, Gqeberha’s freehold market has seen an uninterrupted increase in median prices over the past decade. “While median freehold prices in East London softened in both 2020 and 2021, a surge in freehold prices during the year to date has almost closed the gap between the two metro housing markets once more. In 2021, East London’s median freehold price was R1.05 million, which this year has risen to R1.35 million, just R50 000 below the median price of R1.4 million in Gqeberha.”

Source: Lightstone

Gordon says in both cities, freehold homes have enjoyed stronger growth in prices over both a five and 10-year period. This is probably in line with the influx of semigrants seeking larger, freehold homes and a more relaxed lifestyle in the wake of the pandemic.

Price performance:

“Somewhat surprisingly – given that 73% of housing stock in Gqeberha is freehold – more sectional title properties were sold in 2021 and thus far this year than freehold properties, for the first time in at least a decade, which could perhaps be a reflection of the influx into the market of new, younger residents, possibly first-time buyers who typically opt for a sectional title home.” According to Lightstone, over the past 12 months (Sep’21 – Aug’22) 31% of all new buyers of homes in Gqeberha were young adults (18 – 35 years) – many of whom are likely to be first-time buyers.

Adds Gordon: “A possible contributing factor for the unexpected strength in the NMB housing market is that unlike many other areas in South Africa, employment levels have recovered beyond pre-Covid levels (see chart below), in contrast with national employment levels which remain subdued. “

Source: Statistic South Africa

While Buffalo City (which incorporates East London) has experienced a partial recovery in employment, particularly in recent months, employment in NMB rose to 390 000 in Q2 2022 – comfortably above its pre-Covid level of 356 000 in Q1 2020.

Commenting on the growth in Gqeberha’s housing market, Kreusch says historically, the city has been playing catch-up to other coastal metros. “Home buyers, especially from out of town, are often surprised at the good value they can get compared to, for example, towns like Knysna, George and Mossel Bay, which offer comparatively less for your money. Out-of-towners are also contributing to a strong demand for rental homes, as they want to experience the city first prior to putting down permanent roots.

“Our western suburbs continue to offer exceptional value – such as Rowallan Park, Parsons Ridge, Westering and Kabega, where there are often sizeable three or four-bedroom homes selling for around R1.5 million. In Kabega you can pick up a good two-bedroom sectional title home from about R650 000 and a three-bedroom unit for approximately R950 000.

“Our market is also on average more affordable than other major metros, while the low interest rates have ensured affordability, which, coupled with the low stock levels, has pushed prices up. Demand has outstripped supply, and continues to do so. Positively, as the above stats reveal, our employment levels have increased, even from pre-Covid levels. Adding to the city’s appeal and boosting local employment is completion of Boardwalk Mall, a R500 million development project in the Boardwalk Precinct around the Boardwalk Casino and Entertainment World in Summerstrand.

“The low interest rates have also meant that many more tenants became buyers, with a good number of recent home purchasers opting for secure complexes, whether sectional title or freehold. Many developers have chosen sectional title development as it’s generally much quicker to obtain approvals than subdividing vacant land. In the last five years especially, ‘duets’ have become the norm, with developers buying individual plots and building two units per erf, even on small plots of 600sqm. Each plot essentially becomes its own sectional title scheme. This trend has been prevalent particularly in suburbs such as Fairview, Salesbury Park, Parsons Ridge and Pinelands.”

Kreusch says in general, activity in the sub-R2 million mark has been good in any suburb. With Gqeberha being the ’15 minute’ city we enjoy limited commute time. Even if you live on opposite ends of the city your maximum time to travel in peak times is around 40 minutes. Centrally located suburbs like Broadwood, Charlo, Glendinningvale and Mount Croix remain popular, with the bulk of purchases in the R1.5 million to R2.5 million price range. Lorrain also remains in demand and has seen many businesses migrating further west, especially the motor vehicle dealerships, while there are currently a number of commercial developments taking place along the William Moffatt Expressway.

“Pricing in the Lorraine area remains predominantly between R700 000 and R1.5 million for sectional title and R1.2 million to R2 million for a freehold home. In the upper price ranges, Mill Park, Walmer and Summerstrand are always sought after. Further afield, Beachview and Seaview continue to perform well, and here a sea facing home with a reasonable view can be acquired for around R2.5 million. Sunridge Park, which lies close to the edge of the Newton Park business district, is always sought after with average pricing from R2.2 million to R2.8 million and up to R3 million or more for a more exceptional home.”

Adds Kreusch: “At the top end we’ve achieved some notable individual sales in excess of R8 million, which is rare for our market, while we’ve also seen steady activity in the R3.5 million to R5 million price range.”

In East London, Pam Golding Properties area principal Sean Coetzee says the historically low interest rates have played a large role in residential property market resilience. “This is a vibrant market with high demand, so the challenge is to obtain the stock to sell. Coupled with this and contributing to the demand, our cost of living is lower than the bigger cities and offers a more relaxed environment that can be enjoyed by those who are now able to work from home. This trend has resulted in a large amount of those who previously left East London looking for better work opportunities – capitalising on the ability to return to their roots and work from here. As East London is known for its good schools, other new buyers are moving into the area, including government employees.

“We are fortunate to have Bhisho right on our doorstep and find that many government employees who work there prefer to buy homes in East London and commute. They tend to prefer modern houses that don’t need much work. We also find that realistically priced coastal holiday homes are still sought after among upcountry buyers, especially those who have a history of holidaying in Morgan’s Bay and Kei Mouth. East London families remain attracted to the lifestyle on the East Coast, with primary buyers outnumbering secondary buyers, especially in the estates situated some 20-25km from the CBD, where homes fetch between R3 million and R6 million for three and four-bedroom homes.

“Most of our home buyers are in the age group between 35 and 50 years, many in their 30s and buying a home for the first time or upgrading to larger homes, including those with work space, and mostly moving closer to schools in the East London area. They are generally seeking homes priced between R1.8 million and R2.5 million for a standard three-bedroom, two-bathroom home with double garage, pool and office or study. Those in the age group around 50 years are buying smaller lock-up-and-go homes, such as secure townhouse or homes on a smaller erf which has been subdivided, priced between R1.5 million and R2 million.”

Coetzee says areas in East London most sought after among home buyers are Beacon Bay, Stirling and Vincent. In Beacon Bay homes are newer and more modern, and acquired for between R1.5 million and R3 million. “In Vincent, which is in demand due to its proximity to top schools, homes are older and range from R1.7 million to R3 million, while Stirling is a very popular area close to the beach and good schools. As a result, home owners generally remain in the area unless they are moving out of the town. Here there is also a range of older homes and those which have been renovated, with prices varying from R1.8 million for a fixer-upper up to R3.6 million for a home which is ready to move in.”

Coetzee says in areas such as Dorchester Heights, Beacon Bay and Bonza Bay, there is good value for money in the price range between R1.9million and R2.3 million, so it’s advisable to make an offer without delay as these properties sell rapidly. Ensure you have pre-approval to put yourself in a better position when making the offer.

“The market above the R3 million mark has not been affected by the interest rate increases, and remains very active. In general, the demand for vacant land also remains strong, particularly in the R350 000 to R450 000 price range, among buyers wanting to secure a stand for future home building.”

For further information contact Pam Golding Properties Gqeberha on 041 373 9955 or email justin.kreusch@pamgolding.co.za or East London office on 043 705 4000 or email sean.coetzee@pamgolding.co.za .

Posted by The Know - Pam Golding Properties