We know that the property market is the business of buying and selling land and real estate. South Africa has long been a country of political and economic upheaval, and the property market as well as other markets, is volatile (and controversial).
So what are the main trends in the property market for 2016-2017, and what do they mean for South African homebuyers?
There are always negative people in the media speculating on the market, and how the news is mostly bad for local and overseas investors in property and other markets in South Africa.
But the experts say differently.
Despite South Africa’s unstable economy, property market experts like the Pam Golding Property Research team have found out that our residential property market has stayed pretty stable, and in some areas is growing. You can take a look at their report here.
Good news for potential homeowners!
Here are some trends in the housing market that you should know about.
1. The Western Cape has the strongest property market
Over the year of 2016, there were areas of the country that stayed pretty stable. In particular, the Western Cape property market is booming. The main reason for this is that the WC attracts a lot of buyers from all over the country – people willing to relocate. The province also boasts a young population, and a growing number of first-time property buyers.
2. The Western Cape has many new affordable housing developments
Many people are migrating to the Western Cape, since they became a DA stronghold – there is a growing concern that the government can’t keep the economy stable in other areas, while the Western Cape has a fairly good track record over the last few years.
This means that there is a high demand for affordable property – and property developers are striking while the iron is hot. New housing developments are popping up almost daily in the Cape Town metro and surrounding towns.
3. The Western Cape is a sought-after destination worldwide
People from all over Africa, and all over the world, recognise the Western Cape and especially Cape Town, as the country’s focal point for sports and international conferences. It has great resources and natural beauty, which has created a lot of interest.
This attracts investors from all over the world, and makes Western Cape property very sought-after.
4. House price inflation is getting stronger
House price inflation increased at an average of 6.4% during the first quarter, but it rose to 6.7% in May 2016 compared to previous years.
What does this mean for a homebuyer? Simply that your house will not decrease in value relative to the economy. Your property investment will remain a strong asset in years to come.
5. Property is a better investment than equities
Although the economy is in a state of flux in other businesses, such as the stock market, the housing market remains a good investment opportunity for both first-time homeowners and experienced homebuyers.
People tend to be very cautious in these times, so they like to invest in “real” assets, like property. It’s human nature to want to invest in something solid and tangible – and not just have investments on paper.
6. Sectional Title properties are becoming more popular
Sectional title properties (such as apartments) have outperformed the rest of the market, because of the growing number of first-time homeowners.
Buyers are choosing this form of investment to be able to live in metropolitan areas, rather than the suburbs where distance from jobs is an issue. In a nutshell - people are choosing to buy sectional title property because of its focus on convenience and cost-effectiveness. .
7. Many more people are moving to metro areas
People living in suburban areas in South Africa are increasingly moving closer to town, to avoid stressful commuting, and to have better job opportunities. This means that properties that are closer to the city centres are becoming very popular. The suburbs are not experiencing as high a sales growth.
8. Development is recovering after the global financial crisis
Even though South Africa is experience a state of economic turmoil, the global financial crisis of 2007-2008 is now on the upswing.
This means that international investors have recovered sufficiently and are once more looking at foreign investments – in property as well as in other markets. Development activity in South Africa, especially in the metropolitan areas, seems to be recovering.
9. Affordable housing has the strongest growth in house price inflation
In an unstable economy, people are looking more at housing worth under R1 million, so this category is experiencing the strongest growth in inflation. Countrywide, the average inflation rate was 9.4% for the first half year. In the Western Cape, the regional average was 16.8%.
10. First-time property owners are getting younger
The average age of first-time property buyers in South Africa is 34 years, and the average price for first-time buyers nationally was R813 000.
11. The Gautrain is a major consideration for property buyers
The Gautrain public transport system links Johannesburg, Pretoria and Ekurhuleni. Property investors are working on new developments in areas that the train has made more accessible for commuters. Buyers are also taking the train into consideration and buying near the route.
With the further development of the train, this growth will continue in other areas such as West Johannesburg, Soweto and Mamelodi.
12. KwaZulu-Natal is growing, not slowing
KZN experienced a modest growth, with a focus on the North coast – which is one of the area’s tourist hotspots. The growth is not considered to be waning any time soon.
13. Nelson Mandela Bay is the third-highest performing area in the country
NMBM experienced an average house price inflation of 5.4% during the first half of the year. Over the last 5 years, freehold properties have risen by an average of 22.1% in Port Elizabeth and 29.2% in East London.
This growth is mainly due to major industrial development zones and investments such as the R25 billion gas-to-power programme, and a R11 billion investment from a Chinese vehicle manufacturer.