select
|

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
  
2000
Characters remaining


    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK