Key influence in South Africa’s residential property market

According to recent research by Pam Golding Properties’ international partners, Savills, the single fundamental driver of residential property demand has always been the number of households in a population wanting a roof over their heads.

The price of those roofs is then a function of the number of properties and the amount of money available with which households can compete for them, PGP chief executive, Dr Andrew Golding, told guests at a recent media event.

“This means that three key factors will make for house price growth in excess of general inflation: growing population, increasing affluence and limited land and housing supply. The research also showed that the absence of one of these variables can stall a housing market and the absence of two or more can send property values downward,” said Golding.

According to the recently released 2014 Development Indicators report, South Africa’s population has risen to just over 54 million and is growing at a pace of approximately 800 000 people each year.

In addition, South Africans are migrating at a rapid pace within the country, resulting in more pronounced population trends within the various provinces and metros. For example, between 1996 and 2014, Gauteng’s population is estimated to have increased by 60 percent and the Western Cape by 50 percent. During the same period, the Free State and the Eastern Cape both lost about 20 percent of their residents.

For those moving to Gauteng and the Western Cape, the major cities are the biggest draw cards – reinforcing the rapid pace of urbanisation in SA. Currently about 64 percent of the population lives in urban areas, but the United Nations estimates that by 2050 this will rise to nearly 80 percent.

The search for employment is often the motivation for moving house, SA’s urban areas are growing larger and younger. Government estimates that two-thirds of SA youth live in urban areas. The resultant ‘youth bulge’ in the cities is visible when comparing the population pyramid for the country as a whole with the age distribution of people living in major cities like Gauteng and Cape Town.

“According to mortgage originator ooba, the average age of mortgage applicants is 37 and that of first-time buyers is 34. Given that the largest age cohort in both Cape Town and Johannesburg in 2011 (most recent Census data) was people between the ages of 25 and 29 years, it seems likely that both cities will begin to experience strong growth in demand for housing about five years from now, as this ‘youth bulge’ reaches the age of the average first-time house buyer in SA,” said Golding.

“We think the first of the three metrics identified is likely to continue to provide a strong underpinning for the local housing market – particularly in the major metro areas, during the decade ahead.

“When it comes to affluence, cities and large towns generate over 80 percent of SA’s economic activity, with major metro areas growing twice as fast as smaller towns and cities. Average incomes in major metros are typically about 40 percent higher than for the country as a whole, and employment has grown twice as fast as other areas.

“As a result, between 1996 and 2012, metros accounted for 75 percent of all net job creation in SA. Further fuelled by access to key transport routes and public transportation, and an increasing demand for convenient, urban living, it is no surprise then that the housing markets in metros typically outperform the national average.

“The growing affluence in metro regions, even as growth in the national economy continues to lose momentum, explains why house price inflation in Cape Town, Johannesburg and Pretoria continues to accelerate as these housing markets benefit from growing populations, a relative shortage of housing and growing affluence.

“Turning to the question of regional outlook, according to our Property Index, the top performing regional housing market is the Western Cape. Its large services sector is at least partly insulated from slowdown in China’s commodity-heavy economy. Also, the steady migration from other provinces and the limited number of new housing units completed means that all three metrics for the housing market are influential.”

Golding said that house price inflation in the Western Cape has averaged eight percent this year, well above the national average of 5.8 percent, while house prices in the City of Cape Town continue to register double-digit growth rates – an average of 10.1 percent in the year to May. Over and above this, the Atlantic seaboard consistently continues to outperform other areas with house price growth of around 25 percent for the past 12 months.

“Having entered its busiest season, the Cape Town Metro region is experiencing competing offers on certain properties mainly in the price range below R6 million. A further current trend is that sellers are selling their large homes in the southern suburbs to move to the convenient, cosmopolitan lifestyle on the Atlantic seaboard.

“There is continuing strong demand for Cape Town’s central city property and supply is short, and areas to watch are the Southern Peninsula’s Kalk Bay, Simon’s Town and Noordhoek, as well as trendy Green Point, and the popular Western Seaboard where you can still buy a house for just over R1 million,” said Golding.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 23 Jan 2018
      Many people only start thinking about home-ownership when they are ready to “settle down” or start a family, which is why first-time buyers these days are generally in their mid-30s, compared to those in the previous generation who were usually in their mid-20s.
    • 22 Jan 2018
      Moving away from the city to a country or coastal town and a slower-paced life is a frequent new-year resolution for South Africans, but thorough research should be done before you break free from the hustle and bustle, because making the wrong move could turn out to be a very expensive mistake, and even more stressful for you and your family than staying in the “big smoke”.
    • 22 Jan 2018
      Cape Town is home to many breathtaking and historic homes, but House Invermark designed in 1969 by South African architect Gilbert Colyn, with inspiration from two modernist icons: the Glass House by Phillip Johnson and Farnsworth House by Ludwig Mies van der Rohe is in a class of its own.
    • 22 Jan 2018
      2017 was a challenging year for the South African property market in general, despite small pockets of thriving activity in areas like the Western Cape. As we head into 2018, Tony Clarke, Managing Director of the Rawson Property Group, casts his eye forward to property trends and market influences that could make their impact felt in the New Year.
    • 19 Jan 2018
      Extending from Randfontein in the west to Roodepoort in the east and including the towns of Krugersdorp and Magaliesburg, the West Rand has a plethora of property available to residents who choose to make this unique area their home.
    • 19 Jan 2018
      When it comes to financial planning, doing the work to ensure you’re prepared for unexpected emergencies is just as important as ticking off your other goals and New Year’s resolutions. The beginning of the year is also the perfect time to review your various insurance policies.
    • 19 Jan 2018
      No surprises at the first Monetary Policy Committee of 2018, as Reserve Bank Governor, Lesetja Kganyago, announced that the interest rates would stay at their current levels.
    • 18 Jan 2018
      The Southern Suburbs make up some of the most popular residential areas in Cape Town, comprising charming groups of suburbs which lie to the south-east of the slopes of Table Mountain. It is seen as the city's most expensive residential neighbourhoods with a choice of various private schools, upmarket eateries, wine estates, beautiful homes and trendy apartments.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us