MAIN IMAGE: Carl Coetzee, CEO of BetterBond; Dr Andrew Golding, chief executive of the Pam Golding Property Group
Danie Keet
South Africa’s residential property market continues to shine with national house price inflation at its highest in five years, despite 16 months of a pandemic and recent unrest in parts of KwaZulu-Natal and Gauteng.
According to the latest Lightstone data the housing market remains the surprise success story of recent months and, contrary to fears that house prices would plummet, the market is seeing a consistent increase in inflation.
Carl Coetzee, CEO of BetterBond says: “This is most certainly being driven by the record-low interest rates, which have held steady at a prime lending rate of 7% for more than a year.”
Coming off a high base from last year, when bond applications surged by 147% after lockdown restrictions eased, we are still seeing strong growth with a 35% increase in applications for July, year-on-year, says Coetzee.
“This sustained demand for property is driving house prices across all price bands, but particularly at the lower end of the market.”
According to Lightstone, house price inflation as at the end of June 2021 at the lower end of the market was at 6.5%, two percentage points above higher-value segments of upwards of R700 000.
This price growth is also being seen across all nine provinces, with the Western Cape catching up to Gauteng as house price increases in both regions hit 4.8%.
One of the noticeable trends in the residential property market this year has been a discernible uptick in demand for luxury homes in the R10 million plus price band – a sector where freehold properties have enjoyed an increase in demand, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
“Much of this demand has been driven by local buyers who have identified specific areas of interest and understand that the current market, characterised generally by motivated sellers and well-priced stock, presents opportunities which offer exceptional value for money.
“In regard to freehold homes, these have clearly benefited from lockdowns and the shift to remote working, experiencing 6% price appreciation since the start of the year (Jan – April 2021) compared to 3% for sectional title homes,” Golding says.
Coetzee says the average house purchase prices for bond applicants from Johannesburg North West and South East have increased by 8% and 10% respectively, reflecting the trends highlighted by Lightstone.
“While in the Western Cape, it appears that the period of price correction that saw house price inflation drop by 2% year-on-year in July last year has run its course. The Eastern Cape has retained its spot as the top performing province with house price inflation of 8.3%. Nationally, the average purchase price of homes for BetterBond’s applicants has increased by 13.4%, while first-home buyers are spending more on their homes, with the average purchase price up 15.3% for July, year-on-year.
“The perennial allure of the coast means that house prices in seaside areas continue to rise, with Lightstone reflecting an 8% increase at the end of June, year-on-year,” says Coetzee.
In Gauteng, Lambert Bezuidenhout, Pam Golding Properties area principal in Steyn City, says heightened activity in the upper price band has been more of a catch-up than a recovery, having been stifled by the stringent lockdown measures.
“The majority of our sales are around the R20 million mark for completed houses, with sales of over R35 million and upwards not uncommon. However, while land is still available from just over R3 million, many purchasers then make a further capital investment in luxurious high-end homes which may ultimately enjoy a market value of up to and in excess of R60 million. Of our 14 highest recent sales, all except one were to South African buyers,” he says.
Coetzee says being able to work remotely has shifted buying patterns, and more homeowners are considering property near the beach or the bush as investment options. A stronger focus on quality of life could also explain why freehold house price inflation is comparatively higher, at 6%, than the 3.2% price growth reflected by Lightstone for the sectional title market,” he adds.
Golding adds that generally they find that in the apartment living genre, penthouses are highly sought after and due to their nature, limited in supply and as a result yield very good returns on investment.
