Cape Town might be South Africa’s premier holiday destination and place to call home but many aspiring property buyers are discovering that there are “plenty more fish in the seas” surrounding the country.
Even though it offers beauty, a fabulous lifestyle, and efficient service delivery, its high property prices could be driving buyers straight into the markets of other coastal cities and towns. And, as they are discovering, the alternatives are not too shabby.
Cape Town’s attraction as a holiday destination and address has seen house prices outperforming the rest of the country for the past decade, and even now, while supposedly “correcting”, property here remains generally unaffordable. While, for some, this could even add to the allure of owning property in Cape Town, it appears that there might be a rebound effect in play.
Is Cape Town really the ultimate place to own property? Or are prospective buyers – perhaps forced by high property prices to look elsewhere, and perhaps initially reluctantly – discovering that more affordable alternatives to the city offer better value for money? The answer to these questions depends on who you ask.
FNB’s most recent Estate Agents Barometer notes that foreigners have played a less prominent role in the Cape Town market over the past year, with part of this demand appearing to migrate to Durban and Port Elizabeth. This is despite the levels of foreign buying having increased nationally in recent months.
Property purchases by foreigners in the second quarter (Q2) of this year rose to 3.74% of total purchases from 2.98% in the first three months of this year and 3.61% in the final quarter of last year.
“The improvement in the first half of the year suggests that while many aspiring homeowners may have sat on their hands during the national election period, foreigners (presumably wealthy) used the opportunity to acquire domestic assets, most likely at a significant discount.”
In Cape Town though, buying volumes attributable to foreigners dropped from a high of 10.7% in Q2 of 2018 to 6.5% in Q2 2019. Reflecting on the report and figures, FNB property analyst Siphamandla Mkhwanazi says it is believed that the reason behind this sway is a combination of affordability and the fact that areas such as Port Elizabeth and Durban are perceived to be offering more value for money than Cape Town.
“Also, infrastructure development – such as development near the King Shaka International Airport – as well as the addition of new international routes, has improved Durban’s stature as a more viable and affordable alternative.” Agent feedback reveals that there is “growing interest” in new development nodes like Sibaya, north of Durban, and Grahamstown, now known as Makhanda.
Although Cape Town remains a popular destination for both local and foreign buyers, Mkhwanazi says that “given the underperformance of the domestic economy, buyers are becoming increasingly price sensitive”. “This has led to some buyers casting their eyes to other coastal areas, in search of more affordable alternatives.”
Affordability is the one possible reason why Cape Town would become less attractive to foreign buyers, believes Erwin Rode of Rode & Associates. However, without inside knowledge of the methodology of the FNB survey and its sample size, he is treating the findings with caution.
Rode says it seems that semigrants to the Western Cape fall into two categories: retirees and working families looking for lifestyle changes. This means the fact that the slowdown in the economy makes the relocation of working families more difficult, combined with Cape Town’s unaffordability, could explain the declining semigrant purchases in the city.
And while this does not explain why Cape Town or the Western Cape is losing out to other cities, he says the north coast of KZN “probably offers better value for money”.
Coastal towns offer good amenities and draw buyers
GORGEOUS The Garden Route, home to towns such as Knysna, is becoming a popular alternative to Cape Town for property buyers. Picture: Ron Porter
Whether Cape Town is losing out to other, more affordable coastal areas, is a subjective question. Pam Golding Properties confirms that it is seeing growing buyer interest in other coastal areas, such as along the Whale Coast.
Towns formerly considered to be holiday or retirement options, such as Hermanus, are now being viewed by families as desirable places to live. Annien Borg, the group’s managing director for the Boland and Overberg, says this is partly because many offer excellent schools, hospitals and quality of life.
They are also not that far from Cape Town. “Being able to work remotely, and not from an office in Cape Town’s CBD, has also enhanced the appeal of these towns. Franschhoek, Paarl, Stellenbosch and Somerset West remain popular residential markets for many semigrant buyers...”
Durban is also seeing an influx of Joburg and foreign buyers, says Carol Reynolds, the group’s area principal for Durban Coastal. “With the airport conveniently situated close to Umdloti, Sibaya, Umhlanga and Durban, a short drive to the airport followed by a quick 50-minute flight, makes KZN a far more attractive option for commuters than Cape Town.
In addition, there is much better value for money in KZN...” Port Elizabeth is another city being mentioned and this, says Pierre Germishuys, managing director for Seeff Winelands, West Coast, Cape Town North, and Port Elizabeth, should be no surprise.
“It offers excellent prices and affordability, still well below that of Cape Town and Durban, combined with an excellent coastal location... The city offers superb infrastructure, a great holiday climate and stunning beaches.” While Justin Kreusch, PGP’s joint area principal in Port Elizabeth, says semigration to the area is not yet a notable trend, the agency is receiving inquiries from Gauteng buyers.
It is also seeing a number of people moving to PE for work and lifestyle-related reasons, especially expats returning to the country from Australia and Dubai.
Cape Town’s property prices and rent increases, as well as rises in crime, traffic and water issues are among those affecting people’s decision to opt for the Garden Route rather than the Western Cape, says Tony Clarke, managing director for the Rawson Property Group.
The Western Cape is still one of the most popular destinations for semigration but its higher-than-average property prices may encourage people to buy in areas where they can get more for their money. Such areas include the KZN North Coast, PE and the Garden Route, concurs Craig Mott, Cape Town regional sales manager for the Rawson Property Group.
Lifestyle has a huge bearing on the choices people are making. The KZN North Coast is well-positioned... and the area between Cape Town and Port Elizabeth along the southern coast is “without a doubt one of the most beautiful parts of the country”.
Agents say city has not lost its appeal, despite other options
LEADING LIGHT: Local agents believe Cape Town will continue to be the country’s prime
property magnet. Picture: Supplied
Just because there is increased choice on the South African coastlines, especially around Durban, it does not mean Cape Town has, or will, lose its appeal, says Richard Hardie, chief executive of Knight Frank Residential It still offers “all of those lifestyle options” that other places do not.
“At the end of the day, you get the ocean, you get the restaurants, the amenities, culture, art foundations, the mountain and the vineyards. It’s got so many things that other places in South Africa haven’t got...” From the company’s point of view, there has not even been a slow-up of foreign interest.
Furthermore, Joburg buyers are “definitely back postdrought”, Hardie says. He explains that Cape Town hit a peak and although, with drought, politics and the usual market ebb and flow, the market is in an ebb, it is still “ticking along quite nicely”.
“This year is already better, statistically, and with the exchange rates improving, Ramaphosa effect and with winter coming to an end, we can expect a busy summer.”
The Southern Suburbs, False Bay, and Noordhoek areas are receiving interest from out-of-town buyers as usual, says Arnold Maritz, co-principal of Lew Geffen Sotheby’s International Realty in these areas. “We are told by some of our contemporaries the Garden Route and KZN northern coastal areas are competing aggressively for buyers who would also consider moving to Cape Town.
Property prices in these alternate areas may be more competitive and traffic possibly less congested. The water shortage in Cape Town two years ago was also problematic, but both national and international media have been effective in spreading the message that the situation is much improved.”
Echoing this, Barbara Manning, Lew Geffen Sotheby’s International Realty area specialist for Upper Claremont and Bishopscourt says the loss of momentum in the market 18 months ago due to the drought has dissipated.
“Indications appear to be the Cape Town market at the top end is showing signs of emerging from its two year slump. I’m also hearing buyers expressing interest in Winelands estates.” The Winelands is still seeing considerable interest, especially from European buyers, confirms Chris Cilliers, chief executive and Principal for Lew Geffen Sotheby’s International Realty in the Winelands.
The group’s Constantia area specialist Joanna Thomas agrees, saying foreign and expat investment has remained “fairly consistent”. Cape Town’s flat/deflating price growth and notable rise in stock, especially at the upper levels, make it an “excellent time to invest”, says Ross Levin, managing director for Seeff Atlantic Seaboard, Waterfront and City Bowl.
Happy holiday: Foreigners invest
R&R Most foreign buyers in Durban and Port Elizabeth appear to be in the holiday market. Picture: Wolfgang Dietz
The foreign property demand that appears to be migrating to Durban and Port Elizabeth is in the holiday market, reveals FNB’s Estate Agents Barometer.
But while agents perceive both cities to be experiencing an increase in holidayhome buying over the past six months, the proportion of foreign buyers in these markets (1.9% and 5.1% of respective local sales) is still lower than Cape Town’s 6.5%.
Joburg and Pretoria appear to have been experiencing divergent foreign-demand trends in the past two quarters, according to the report. “In Johannesburg, volumes attributed to foreigners have risen from 2.6% in Q4 2018 to 4.7% in Q2 2019. By contrast, foreign purchases have decreased from 2.4% to 1.3% in Pretoria over the same period,” it says. FNB data further reveals foreigners are largely behind the recent uptick in demand on the African continent.
Sales down but uptick expected
DOWN Semigration and foreign buying in the City Bowl is declining. Picture: Jean van der Meulen
Trends in luxury buying, foreign buying, emigration and semigration are merely reflecting the political and economic concerns that have been affecting the property market this year, says Seeff’s Ross Levin.
Emigration-related selling is on the increase and while there is “still an influx” of buyers from other provinces, it is lower compared to the pre-2017 phase, generally in line with an overall decline in market activity. Foreign-owned properties are also still being put up for sale.
“Overall, semigration and foreign buying in the Atlantic seaboard/Waterfront/City Bowl areas have declined from around 20% to about 10%, at best, this year. We do, however, expect this to pick up once the economy picks up and we are also likely to see higher demand when the summer sets in, which is traditionally the tourist season.”
Seaboard sales: Prices have eased
POSH Luxury properties in Cape Town are still well-priced for foreigners. Picture: Dimitris Vetsikas
While it appears semigration to Cape Town has eased, the Pam Golding Property Group says it might well be that many of the people who moved to the city from other parts of the country rented before buying and their buying activity is, therefore, not reflecting as semigration.
It maintains Cape Town has a global reputation as a desirable destination and property is still well-priced for foreign buyers who benefit from the exchange rate. This is especially true of the Atlantic seaboard. House price correction is opening this market up to more buyers, says agent Basil Moraitis.
“Sustained house-price growth set the Atlantic seaboard apart from the rest of the country in terms of performance. But now we are seeing this market recoupling with the rest of the country, in line with affordability.” The group is also seeing an increase in top-end sales over R20 million.