The South African residential property market is at last showing signs of a healthy recovery, having slowly but steadily recuperated from the recession of 2008, according to Dr Andrew Golding, chief executive of the Pam Golding Property group.
This exceptional 1 200 square metre home in Sandhurst, Sandton was sold by Pam Golding Properties Hyde Park office for R33 million.
He notes that increasing sales volumes, rising values and growing demand all underline the recovery to more normal trading conditions.
“This promising situation signals just how dynamic the residential property sector is – constantly on the move, with buyers and sellers entering into transactions for a wide variety of conventional reasons such as relocation for work or lifestyle, first-time ownership, downscaling or upscaling, acquiring a sound investment, or simply putting down roots,” he says.
Golding points out that market recovery is marked by a resurgence of investors, partly due to high demand for rental accommodation, sustained growth in middle income sales, particularly among the emerging black middle class, a desire for homes in locations which offer better security and access to work and schools; the re-emergence of the new developments market, mainly in major centres and growth nodes, coupled with demand for sectional title homes, the continued strong performance of the top end of the market and the re-emergence of the über prime sales market to both local and international buyers.
However, he notes that potential risks to this recovery include continued perceived limited access to mortgage bonds, fewer homes coming onto the market, affordability and a relative seesawing of consumer sentiment.
“The recent half percent increase in interest rates was a surprise in that it occurred earlier than expected, but appears to have been priced in by the market as an upward trend in interest rates during the course of this calendar year (2014) had been predicted by many commentators for some time.”
As for property values, he notes that banks report nominal growth in value terms averaging between five percent and eight percent, while Lightstone reported 6.9 percent growth in sales transactions in December 2013 over the previous year and a 21 percent growth in total sales values.
The agency reports sales turnover of over R14.8 billion from March 2013 to February 2014 - an increase of 21 percent over the previous financial year, while sales volumes (by units) reflected a 13 percent improvement.
During this period, high ticket priced homes were sold on Cape Town’s Atlantic Seaboard ranging from R20 million to R100.5 million and up to R26 million in Cape Town’s Southern Suburbs.
In the Cape Winelands region, several commercial farms in the Elgin/Grabouw area sold for over R20 million.
Lifestyle farms in Franschhoek changed hands for up to R27 million and a home on the De Zalze Golf Estate near Stellenbosch fetched R21.555 million – the highest price yet achieved for a property on the estate.
Numerous properties sold in Gauteng for in excess of R20 million.
This exclusive property on De Zalze Winelands Golf Estate in Stellenbosch in the heart of the Cape Winelands was sold by Pam Golding Properties for R21.555 million. The five bedroom (all en suite) home includes every modern luxury, including a home theatre room, surround sound, library, wine cellar, fitted bar, sauna, Jacuzzi, indoor braai and covered veranda with scenic views.
Meanwhile, Bill Rawson, chairman of the Rawson Property Group, says it is now estimated house price growth will stay above 8 percent for the coming year and rentals have risen nationwide by over 6 percent with 9 percent plus being the norm in many of the high demand urban areas.
He points out that some analysts have said that residential property is now overpriced and that the price ‘bubble’ is about to burst.
“I do not accept this view, while it is true that all consistent property rises eventually result in a bubble, which in one way or another ‘bursts’.”
Rawson says South Africa’s prices will continue to rise for the foreseeable future because demand for both owned and rented property is so strong at the moment, far stronger than supply is able to meet.
Currently, he says they have 13 000 properties for sale and I calculate that the majority of these have experienced at least a 4 percent year-on-year rise in value.
Furthermore, if correctly priced, it is clear from our figures that they tend to sell within eight weeks.
Properties at the top of the price bracket, especially those above R10 million still lack buyers and in some cases have to be discounted by as much as 40 percent when sold.
“In our economy, homeownership has to be stimulated and encouraged – and private enterprise could and should play a part here, for example by making low interest rate housing loans available to loyal employees or by guaranteeing bond payments for such people.”
He points out that no government in world history has ever fully caught up with the housing backlog without the help of the private sector.
According to Rawson, two factors make the stimulation of homeownership vital.
The first is that, although they form a significant part of the annual budget, our pension payouts still leave many people semi-destitute and on the brink of poverty.
Secondly, in a country like ours where the inflation rate is said to hover around 6 percent and will almost certainly not go below 5 percent, a home is the one investment that can be relied on to outperform inflation and thereby compensate for a low level of retirement benefits.
It is these factors which make South Africa so different from fully developed First World countries like Germany, where people can happily rent all their lives and still enjoy a well provided for old age.
“That is simply not possible here in South Africa and we have therefore to foster homeownership as a means of compensating for under-resourced retirements,” he adds.
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