Dr Andrew Golding | Residential Market Review
Together with its international partners Savills, Pam Golding recently conducted some research into the basic, longer-term market drivers of the residential property markets. Dr Andrew Golding gives us a summary of what’s been happening around the country and what we can expect to see into 2016.
What is prompting the spikes in demand in certain areas?
Not only is the total population increasing, but South Africans are migrating at a rapid pace within the country as well – 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 while the Western Cape’s population rose by 50 percent. During the same period, the Free State and the Eastern Cape both lost approximately 20 percent of their residents. Currently approximately 64 percent of the population lives in urban areas, but the United Nations estimates that by 2050 this will rise to nearly 80 percent.
How do the youth factor in?
With the search for employment often the driving force behind in-migration, South Africa’s urban areas are growing larger but also younger. Government estimates that two-thirds of South African youth live in urban areas. The resultant ‘youth bulge’ in South African 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 years while that of first-time buyers is 34 years. 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 in about five years as this ‘youth bulge’ reaches the age of the average first-time house buyer in South Africa.
How do you explain the bouyancy of the housing market despite the loss of momentum in the national economy?
The growing affluence in South Africa’s metro regions, even as growth in the national economy continues to lose momentum, explains why house price inflation in major metros like Cape Town, Johannesburg and Pretoria continues to accelerate as these housing market benefits from growing populations, a relative shortage of housing and growing affluence within the metro population.
Which areas are showing the most resilience?
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. Furthermore, the steady in-migration from other provinces and the limited number of new housing units completed means that all three metrics for the housing market remain supportive. House price inflation in the Western Cape has averaged eight percent year to date, 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).
The KwaZulu-Natal housing market is similarly buoyant – with house prices in the region increasing by an average of 7.2 percent during the year to date, nearly 1.5 percent above the national average. The housing boom is located primarily on the North Coast, extending north of Durban through uMhanga, Ballito and further afield, rather than in the metro hub itself. The relocation of King Shaka International Airport to the area, coupled with decentralisation of business nodes and schools as well as the proliferation of new up-market housing estates, has triggered a migration of families from elsewhere in the province and commuters from neighbouring regions.
Gauteng averaged only 5,5% during this year to date? Why?
The underperformance of Gauteng’s housing market is at least partially attributable to the presence of several mining towns in the region, which have been hard hit by both the slump in global commodity prices and ongoing labour tensions.
But against this background, Johannesburg and Pretoria continue to develop at a rapid pace with growth being particularly evident across a number of growth nodes. With transport costs and traffic congestion on the increase, residents are looking to live close to economic nodes and transport corridors that allow easy access to the workplace and educational institutions.
Which areas within Johannesburg are proving especially sought after?
We’re seeing rapid residential densification within areas such as Rosebank, Midrand and Fourways. In addition, Johannesburg itself and Braamfontein are undergoing massive redevelopment while the growth of Sandton continues unabated.
Interestingly, the leafy, older suburb of Blairgowrie in Randburg in Johannesburg’s Northern Suburbs is coming into its own with buyers finding value in homes, much as occurred in Parkhurst some 12 years ago. With increases in prices in areas like Parktown, Parktown North and Greenside, buyers are turning to Blairgowrie where for R1.8 million or R2.2 million they can acquire a 40 year old residence in a beautiful tree-lined street – versus R4 million or R5 million.
In a similar vein, and in a current challenging market where areas tend to compete, the trend toward value is also seeing some upmarket buyers who previously may have looked at property in Hyde Park or Sandhurst placing a greater importance on value than address, and turning to Bryanston.
There’s an increasing demand for sectional title property – why is this?
Not only is the South Africa population growing by an additional 800 000 people each year, but a gradual decline in the number of people per household – from four per household in 1996 to just 3.4 people in 2011 – means that the number of households is increasing at an even faster pace than the population. This is reinforcing the trend towards densification and smaller units, with sectional title units increasingly popular. While freehold price inflation has been slowing sectional title price inflation continues to gather momentum. South African developers are responding to the change in demand, with sectional title units rising from 10.9 percent of total plans passed in early 2000 to 38 percent in early 2015.
Text and photographs: Supplied