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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2018-08-17

High-end residential property markets such as Zimbali are down by 71.46% year on year

I recently completed research on the sales activity across the leading estates and suburbs around the country to find that high-end residential property markets such as Zimbali are down by 71.46% year on year, which is reflected across other high-end markets like Clifton (down by 70.54%) and the V&A Waterfront (down by 59.05%).

What was interesting when reviewing the transactions in Cape Town is how many local Durban clients I recognized as having recently purchased apartments in Cape Town. Details of the current market conditions within Cape Town, as the epicenter of the South African residential real estate market, is therefore of wider interest.

FNB recently published its comprehensive report on the price performance of the City of Cape Town suburbs, which provides an in depth view of how demand has shifted recently. The broad overview is that Cape Town is experiencing its 8th consecutive quarter of slowing year-on-year house price growth from a 10-year high of 15.4% recorded in the 2nd quarter of 2016, down to its current rate of 8,7%.

The sub-regions closest to the city and around the mountain (City Bowl, Atlantic Seaboard, City Near Eastern Suburbs and the Southern Suburbs) have shown the strongest house price growth over the past 5 years, but this has started to change as home affordability concerns have driven demand away from these areas.

As an example the Atlantic Seaboard region (by far the most expensive residential properties in the country) has seen its average house price growth slow sharply from 27.7% in the fourth quarter of 2016 to its current 1.9% in the second quarter of 2018, representing the slowest price growth across the City of Cape Town regions.

As a comparative the City Bowl price growth has decreased from a high of 23.9% in the second quarter of 2016 to 9.7% in the second quarter of 2018. The popular Southern Suburbs, which include areas such as Bishopscourt and Constantia have seen house prices slow from 15.9% in the second quarter of 2015 to 7.4% in the second quarter of 2018.

What has happened is that areas close to the City, but previously regarded as lower income areas, such as Woodstock and Salt River, have attracted developers who have invested in a range of new projects thereby uplifting these areas and trading on the relative proximity to the City on the one hand and the hub of the Southern Suburbs on the other.

As buyers in Cape Town retreated away from the mountain they also looked northwards towards Blouberg, Milnerton and Melkbosstrand (the Western Seaboard sub-region). Blouberg has been a favourite destination for Durban buyers migrating to the Cape as it provides proximity to the ocean, which we are used to in KZN, at a more affordable price point.

Cold water and windy days go with the territory. This Western Seaboard area has seen house price growth slow from 14.3% in the 3rd quarter of 2017 to 10.2% by the second quarter of 2018.

For the most part the slower growth rates recorded across the City of Cape Town sub-regions are still well in excess of our house price growth across the KZN suburbs. This re-enforces my contention that our premier suburbs are offering compelling value and are relatively underpriced.