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In 2019 affordability and location will be key property drivers

MAIN IMAGE: Dr Andrew Golding, CE of Pam Golding Property group

Affordability and location have emerged as key considerations with property buyers during this tough as nails year and they are expected to remain important in 2019. This and other insights as to the increased popularity of sectional title homes emerge in the Pam Golding Properties Annual Residential Property Report 2018 by Dr Andrew Golding, CE of Pam Golding Property group.

According to the report, although it has been another tough year, with a VAT increase, rising municipal rates and fuel price hikes adding considerable pressure to household finances, the South African property market remained resilient. As can be expected affordability as well as proximity to airports, business centres or schools to reduce travel time and costs have emerged as strong considerations for homebuyers. Here follows highlights taken from the report.

Gauteng and KZN slowly overtaking Western Cape

Cape Town is still the top performer in South Africa’s luxury market and the second fastest-growing luxury residential property market globally, but Dr Golding expects 2019 to be the year that Gauteng and KZN might take the lead with property sales, although not to the extent that the Cape outperformed the rest in recent years.

Gauteng accounted for 42.3% of total unit sales in the period April 2017 to March 2018 where as the Western Cape only accounted for 24.8% of total sales for the same time period. This is attributed to the impact of the drought and the lack of affordable property. KZN accounted for around 11% of total units sold for the same time period.

According to the Global Metro Monitor, a report by the Brookings Metropolitan Program in 2018, Pretoria has emerged as the fastest growing South African metro economy, which strengthens the case for property investment in this city.

An interesting trend is the interest shown in buying homes for permanent residence in coastal towns formerly considered holiday towns along the Whale Coast and Garden Route.

Growth in sectional title sales

Although most homes sold are still freehold properties (57.4% in the first quarter of 2018), these sales have been declining while more and more people are opting for the convenience and security of a sectional title or an estate home. In 2003, sectional title properties accounted for just 8% of total transactions but by 2018 this had risen to 22%.

Gauteng remains the uncontested frontrunner with just over half of all sectional title sales sold in this province every year for the past 15 years. This is because it is a high-density area where there is also a demand for homes near business districts and many home seekers are first-time buyers. The top sectional title areas in Gauteng are Sandton (61% of sectional title sales in 2017), Roodepoort (59%) and Randburg (52%) and Midrand (49%).

In the Western Cape the top sectional title towns include coastal towns like Strand (52%) and Mossel Bay (24%), university town Stellenbosch (42%) and Bellville (36%) and Brackenfell (18%) in the Northern suburbs.

In KwaZulu-Natal Amanzimtoti (78%) was the most popular area for section-title sales last year with Umhlanga second at 61%. Margate (59%) and Durban (55%) are also favoured options.

Sectional title prices have shown promising growth over the last five years and are expected to continue rising as demand increases forecasts Lightstone.

Rental expectations

The rental market remains dependent on supply and demand, and while no rental market ‘boom’ is expected, their observation at Pam Golding Properties is that properties that are priced right do let and they are expecting the rental market to improve from early next year when corporates start looking again for rental properties.

Outlook for 2019

Affordability will remain a key consideration. The demand trend is moving away from the historically popular but less affordable towards more affordable areas that also offer easy access to business areas and great schools.

The trend towards smaller, better located properties (sectional title) is expected to continue, as this more affordable especially for young first-time buyers. South Africa has a large population of younger generation first-time home buyers eager to become property owners. On a positive side more and more banks are willing to offer 100% loans to first-time buyers with about 60% of first-time buyers benefitting from this.

An interesting new trend is the emergence of the micro-unit which is between 20 to 30% smaller than a conventional sized studio but offers a more affordable rental option for those who want to live close to work.

With more and more retirees opting for a more active estate living with access to medical care rather than the traditional old age home, there is an increasing demand for retirement villages with many residential estates adding this to their product offering.

Although the outlook for economic growth in South Africa remains constrained with the rand susceptible to international upheavals (such as a possible trade war between the USA and China, rising oil prices, etc.), they remain optimistic about the country’s property market.

“Pam Golding remains fundamentally optimistic. Our property market is grounded on sound fundamentals and we hope that the upturn is hopefully not far off,” concluded Dr Golding when presenting the report Thursday 8 November at a media function hosted at their headquarters in Bishopscourt, Cape Town.

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