SA Market; Buoyant not bubble

December 8, 2015

Young professionals moving to South African cities are fueling demand for residential real estate and driving up prices in certain sectors where supply is low, but some Realtors are reluctant to use the “b” word, according to reports in the SundayTimes and IndependentOnline.

A limited supply of suitable homes for a growing population of young South Africans should see house prices continue to rise for the foreseeable future, based on research from international property group Savills, said Andrew Golding, CEO of Pam Golding Property group.

Despite general problems in the South African economy, growing affluence means that affordable homes are now scarce and enjoying price increases above the rate of inflation.

A significant number of South Africans who lived outside major metropolitan areas 20 years ago have urbanized, mostly in Gauteng and the Western Cape, Golding said.

South Africa’s residential property market is outperforming the general economy, Seeff Properties chairman Samuel Seeff said in October, IndependentOnline reported.

The country’s gross domestic product is growing at 1.5 percent-to-2 percent but residential property prices are grew about 7 percent in 2015, Seef said.

Seef said he preferred to use the word “coccoon” rather than “bubble” to describe the South African real estate market.

“I chose the word ‘cocoon’ carefully because it’s not in a ‘bubble,’” he told IOL. “The market is nowhere near that.”

The Western Cape is the top-performing regional market, Golding said.

While South Africa’s house price inflation averages 5.8 percent, homes in the Western Cape have averaged 10.1 percent and Atlantic Seaboard homes have seen prices grow by 25 percent for the last year.

KwaZulu-Natal house prices have grown an average of 7.2 percent in the past year, especially north of Durban in Umhlanga, Ballito and further north, SundayTimes reported.

Gauteng house prices grew an average of 5.3 percent, just below the national average, with values dragged down by commodity price slump that affected property values in several mining towns.

In these towns house prices still increased — just at 3.4 percent on average. Johannesburg itself saw growth above inflation at 6.5 percent and Pretoria was even higher at 7.5 percent.

Certain areas of Johannesburg are seeing rapid transformation including Sandton, Rosebank, Midrand, Fourways and Braamfontein, Golding said.

Seef said supply is short in many areas, which means properties coming on the market that are priced right are selling within two-to-four weeks instead of three-to-four months average.

Cape Town and certain spots on the Atlantic Seaboard continue to see high-end home sales including recent sales for $3.35 million and $7.75 million. However, in Johannesburg, lack of activity in the $100,000-plus market is causing concern, Seef said. “The people do have the finances, but at that level they are either looking to purchase in Cape Town or look to take some money offshore, which does not bode well for us,” he told IOL.

South African house prices have appreciated by a compound average of more than 11 percent a year since 1966, according to TheSouthAfrican.




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