Buying property in the Western Cape

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23 Aug 2013

The Western Cape continues to outperform other provinces in terms of its ability to attract repeat home buyers from other provinces and retain its own, according to the FNB Regional Migration Trends report.

This north-facing Lake Michelle home with three bedrooms, three bathrooms and two lounges, boasting panoramic views of Chapman’s Peak, was sold for R3.2 million by Greeff Properties.

According to the report, the big four provinces (Gauteng, Western Cape, KwaZulu-Natal and Eastern Cape) have the lowest percentage of repeat buyers buying in other provinces, with the Western Cape having the lowest percentage of repeat buyers buying elsewhere, recording a total of 12.9 percent of its total repeat buyers.

The smaller five provinces (Limpopo, North West, Northern Cape, Free State and Mpumalanga) have higher percentages of repeat buyers buying outside of their provinces, Limpopo having the highest at 31 percent of repeat buyers buying elsewhere.

Writing in the report, John Loos FNB household and property sector economist and Kutlwano Maphapho FNB statistical analyst, explain that the 2012 level of repeat buyer outflows correlates broadly inversely to relative provincial economic performances over the prior five years (2007-2011), with the major provinces showing both the higher average economic growth rates along with the lower repeat buyer outflow rates.

“When examining net in/outflows of repeat buyers by province, the Western Cape remains far ahead with a massive net repeat buyer inflow of 6.7 percent of total repeat buying in the province.

“By comparison, the other three of the big four provinces, along with four out of five of the smaller provinces, have net repeat buyer outflows,” they say.

Loos and Maphapho point out that the attractiveness of the Western Cape is believed to be the combination of it being the second largest regional economy in South Africa, the second fastest growing economy behind Gauteng, while also being perceived as a great lifestyle region.

While the Western Cape has the best estimated net inflows of repeat buyers, and lowest gross outflow, it is believed that Gauteng may have something of an advantage in terms of attracting younger members of the labour force from other regions who are aspirant 1st time home buyers, according to Loos and Maphapho.

Greeff Properties report a surge in buyer activity in the Noordhoek area and buyers are prepared to pay a bit more in Noordhoek because they perceive excellent value for money.

While others may be relocating for work purposes, they say a higher percentage of departures of repeat buyers from the larger economic centres are for non-work related reasons, such as retirement and lifestyle.

What’s more, says Mike Greeff, the differential between the asking price and selling price of properties has improved to the seller’s advantage in that it has dropped by five percent to minus six percent in 2013, from minus 11 percent in the first seven months of 2012.

Greeff says when one compares total sales revenue figures for the first seven months of 2012 with those of 2013, according to Propstats, total sales revenues in Noordhoek increased by 88 percent from R39 240 000 in the first seven months of 2012 to R73 878 750 for the same period in 2013.

He says people living in Noordhoek tend to embrace a rural/beach-holiday lifestyle complete with extensive natural beauty, equestrian trails and exquisite ocean and mountain views.

Most Noordhoek residents run businesses from home or tend to work in the Noordhoek valley or in the Southern Suburbs generally as far as Claremont, he says.

Migration trends

Loos and Maphapho point out that in terms of total inter-provincial repeat buyer migration, 2012 saw a 3.1 percent growth from 4.8 percent in 2011 – making it the second year of slowing growth in line with a recent economic growth slowdown, which constrains employment growth and labour mobility.

However, as a percentage of total repeat buying, interprovincial repeat buying rose to 18.7 percent, higher than 13.8 percent in 2000.

They note that it appears that household mobility is rising, and that a greater portion of households relocate to more far off destinations, predominantly for work purposes.

“One thing that certainly did not change was the Western Cape’s apparent competitive advantage in the form of the lowest percentage of repeat buyers leaving the province, as well as by far the strongest net inward migration rate of repeat buyers from other provinces.”

The City of Cape Town and surrounding areas has the benefit of a perceived high quality lifestyle compared to many other South African cities, and it is this combination of good economic opportunity along with lifestyle that appears to be proving to be the winning recipe in attracting both wealth and skills to the province in relatively abundant quantities, explain the report writers.

The City of Cape Town and surrounding areas has the benefit of a perceived high quality lifestyle compared to many other of South African cities, and it is this combination of good economic opportunity along with lifestyle that appears to be proving to be the winning recipe in attracting both wealth and skills to the province in relatively abundant quantities, explain the report writers.

While others may be relocating for work purposes, they say a higher percentage of departures of repeat buyers from the larger economic centres are for non-work related reasons, such as retirement and lifestyle.

For example, with Gauteng, estate agents point to a significantly lower percentage of departees doing so for work related purposes, suggesting that the province loses less active skilled labour than may meet the eye.

“Furthermore, it is believed that the larger economic centres, especially Gauteng, benefit more from inward migration of aspirant first-time buyers in the early stages of their working life, than do the smaller provinces.”

Loos and Maphapho say the gross outward migration rates of repeat buyers appear to be better correlated to economic growth.

As an illustration, in 2012 the big four provinces had noticeably low repeat buyer ouflow rates, with the Western Cape having the lowest rate (12.9 percent of total repeat buying in the province), followed by Gauteng (16.2 percent), Eastern Cape (19.5 percent) and KwaZulu-Natal(19.7 percent).

The smaller five provinces all had noticeably higher repeat buyer outflow rates, Limpopo being worst with 31 percent of total repeat buyers buying in another province, followed by North West (30.3 percent), Northern Cape (29.9 percent), Free State (26.1 percent) and Mpumalanga (24.3 percent), they explain.

According to the report, inter-provincial migration has been growing moderately following the 2008/2009 economic recession slump.

After massive declines of -29.6 percent and -34.2 percent in 2008 and 2009 respectively, growth in repeat buyer movement between provinces has recovered to a moderate rate at best in the subsequent years, reflecting an economy that is growing, but certainly not “shooting the lights out”, they note.

There has been renewed growth in the number of home buyers who are buying again after or around the time of selling their previous property and relocating between provinces.

FNB Estate Agent Surveys reveal an increase in the percentage of sellers selling in order to relocate to another part of the country from lows of 6 percent of total selling at stages around 2009, just after the recession, to between 8 and 9 percent of total home selling in recent quarters. - Denise Mhlanga

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