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Sentiment improving in residential property market

While formal economic indicators may not yet be showing signs of a turnaround in the residential property market, Pam Golding Properties (PGP) believes it’s only a matter of time before they do. 

PGP’s Cape Town metropolitan region has seen better-than-expected sales turnover in the first two months of 2013, coupled with increased levels of interest from potential buyers, including a notable number of Gauteng residents.  The company’s regional MD Laurie Wener says sentiment is definitely improving, with noticeable rejuvenation in several sectors of the market.

“From our perspective, the property cycle is definitely showing the first positive signs of emerging from its negative phase,” says Wener.  “People are once again looking to make changes to their homes, commensurate with the naturally-occurring changes in their lifestyles.  So after a period of quieter activity, we are now seeing more buyers wanting to upscale as their families grow and financial security improves, or downscale for retirement and after their children have left home.  Others are simply opting for a sideways move to gain a foothold in a better area, or even just for a change of environment or scenery.”

Stock shortages in some areas

Wener notes that some areas such as the Atlantic Seaboard and parts of the Southern Suburbs are experiencing stock shortages once again, which will eventually drive prices up.  However, she says there are still nodes where excellent value for money can be obtained.  “It is still not too late for value-driven buyers to acquire good properties with the potential for excellent capital growth in the medium to long term; around five to 10 years,” she says.
  
“Low interest rates are another factor working in favour of buyers, coupled with the perceived easing of mortgage criteria in the Western Cape.  Investors are also aware that with the current low rate of return on cash investments, it makes good sense to invest in property, which is still regarded as the long-term creator of real wealth.  It is impossible to know exactly when it is the best time to buy, but an educated guess would say right now.”

Wide range of buyers

Whilst the bulk of sales activity has been to local buyers relocating within the Cape Town area, Wener says there has been a notable upturn in enquiries from upcountry buyers, especially those based in Gauteng.  “They have been purchasing across all price ranges, in both the residential and development markets,” she says.  “The reason for purchase is varied, including a mix of second homes and holiday properties as well as smaller properties to be used as a part-time residence in the city by those who visit frequently on business.  The Atlantic Seaboard in particular is proving particularly popular with this market.”

International buyers still account for only a small percentage of sales, but Wener says foreign interest is still present, across the price spectrum.  Recent sales to foreigners have been mostly for holiday use or part-time residence, plus a few investment purchases.

Development sales

Among the sectors showing particular signs of growth is the market for new developments, which is on the rise after more than five years of extremely sluggish activity.  “Buyers are showing sufficient confidence in the market to pay slightly more for brand new buildings,” says Wener, “especially those in established areas that are regarded as recession-resistant, such as the Atlantic Seaboard, City Bowl and Southern Suburbs.  We are seeing particular interest once construction is underway on the new buildings, and even more so as they approach completion.  The appeal of moving into a brand new building with modern finishes and security is extremely high, and many are viewing their purchase not only as a lifestyle decision, but as a long-term investment.”

Examples include an upturn in enquiries for The Odyssey in Green Point, which is already several storeys into construction.  PGP sold 11 units in the building during January and February 2013, to a total value of over R17 million.  Similarly there was an upturn in sales of completed units at The Quadrant in Claremont.  Another building seeing a significant surge in enquiries was Amalfi on the Mouille Point coastline, where ground has been broken to commence construction.

Sectional Title sales

It’s not only new developments seeing high levels of activity, but the sectional title market in general – particularly so in the Atlantic Seaboard and City Bowl.  PGP’s area manager Basil Moraitis says his agents sold 44 sectional title units in these areas in January and February (2013) alone, to a total sales value of over R200 million.  (These figures exclude sales in new developments, and refer only to second-hand units.)

Prices ranged from R550 000 for a studio apartment in the City Bowl to R15 million for a trophy property measuring just 140sqm, located right on Second Beach Clifton.  Buyers included a mix of locals and upcountry buyers, particularly form Johannesburg and Durban, buying either for investment purposes, for holiday use or for accommodation for their student children.

Rentals

Residential rental activity remains buoyant across most price brackets.  PGP’s Western Cape rentals manager Dexter Leite says the company has been extremely busy in this field in the first quarter of 2013, with close to 270 leases signed or renewed in January and February alone.   The Southern Suburbs, City Bowl and Atlantic Seaboard are particularly busy, and there is ongoing notable activity at the top end of the rental market.  Leite says his team has negotiated a number of rental deals at between R30 000 and R60 000 per month during this period.



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