12 Aug 2008
Upcountry buyers with cash in their pockets are among the main drivers of the property market on KwaZulu-Natal's Hibiscus Coast.
Long a popular tourist and retirement trail which meanders southwards from Hibberdene through Shelly Beach, Uvongo and Margate to Port Edward, it has, like most parts of South Africa, felt the ravages of an upwardly-bound interest rate, inflation and rising fuel costs.
However, after "very slow trading" from December 2007 to March 2008, Willem Erasmus, principal of Acutts Margate and Port Edward, sees signs of the market turning – provided the interest rate remains stable.
His spirits are being buoyed by a run of good sales in the second-hand home market, where demand is strongest for properties in the R800k to R1,2m price range. The majority of these buyers are from upcountry, he says, with 90% of flats and homes on the beachfront being bought to let out to holiday makers. Away from the beachfront, he's finding that purchasing is mostly for permanent living.
"Most of our buyers are looking for permanent or retirement homes, with the balance comprising investors wanting leisure units," he says, adding that there is very little interest in flats in the R600k to R800k price range. Rather, people are focusing on the R1,5m sector.
Since April, he has seen some "substantial" sales in the second-hand home market, the result in part of sellers finally willing to accept less than their original asking prices. "Offers are generally about 30% lower than the listing price. Serious sellers are increasingly accepting this reality, even those who bought in 2007 when the market was high, knowing that not enough time has passed for them to recover their investment."
As a result, Erasmus reports sales of flats for up to R300k below asking price.
"The new rates policy is going to further affect the sectional title market as a result of owners having to fork out an additional R400+ a month in rates. Since bodies corporate are unlikely to lower the levies by much, because of the rising costs of electricity, labour and water, it will be interesting to see how many units are offloaded on to an over-supplied market in the next three months. We are expecting a dramatic increase in stock, coming on the back of a growing number of requests for permanent rentals."
"The market is busier than it was in 1998 when the interest rate rocketed but it's slower than when the rate started moving down again. Aside from the obvious effects of rising living costs, this could also be because negative political sentiment is higher. Whatever the reason, we cannot afford for the rates cycle to go much higher."
Price growth has fortunately stabilised in his area, he reports further. Small three bathroom, single bathroom homes in lower income areas start at around R400k, while an average family home is priced from R950k to R1,4m. At the top end of the spectrum, penthouse apartments come with price tags of R3m to R4m, he reports.
Gaby Frey, principal of Gaby Frey Real Estate and Business Brokers, says while the prevailing market favours purchasers, it's not to say that realistic sellers aren't selling.
"Correctly priced properties are moving, with the most attractive sector of the price bracket being between R700k and R1m.
Of her buyers, she says they are literally coming from near and far.
"Over the past six or seven months, we have dealt with foreigners, upcountry buyers and locals who are up- or down-sizing. We are seeing a fair mixture of cash buyers or those financing their purchases through a combination of cash and bonds. It's also not uncommon for today's purchasers to sell other property with the intention of using it to allow them to re-invest in property here."
Another interesting trend, she reports, is how people are arriving at values. "There was a time when a property was considered cheap or expensive by default, given its location. Now this is not always the case. Rather, each property's individual merits influence the value and need to be considered in addition to the area."
Most demand is for properties in the R700k to R1m price range, with sectional title sales being predominant in her region.
"This may be because there is an ever-increasing number of sectional title units on offer, as well as other considerations such as demand for holiday accommodation and the holiday buy-to-let market. Crime adds to the picture since it makes the security offered by sectional title more attractive."
While Frey says prospective purchasers are thinking twice before buying at the moment, she sees irony in the fact that the buy-to-let market is actually benefiting from the current situation.
"Rental demand is rising because people are biding their time before actually committing to a long-term bond repayment," she explains.
In the current market, Frey says a property owner with a 100% bond cannot expect a tenant's rent to cover the bond repayment.
"It's not an exact science, but with the average three bedroom home fetching a permanent monthly rental of between R4k and R5k, and the average bond on the same property probably in the region of about R10k, it is a viable proposition for a long-term investment. Owners with small bonds are therefore at an advantage when taking the rental route. Obviously the holiday rental market offers higher returns, but one needs to bear in mind that it is more labour-intensive in terms of management," she points out.
For more information contact Acutts Real Estate Port Edward and Margate on 039 311 1848.
Have a comment or question about this article? Email us now..
Click here for more property news articles.
Need a blog?
Start your own blog with a free blog from 24.com.
Townhouse for sale in Langenhovenpark R 790 000
Apartment / Flat for sale in Montana R 1 395 000
House for sale in Mooikloof R 4 200 000
Apartment / Flat for sale in Upper Main Street R 1 500 000
Townhouse for sale in Pumula R 920 000
House for sale in Bathurst R 1 250 000
Apartment / Flat for sale in Annlin R 695 000
Apartment / Flat for sale in Plettenberg Bay R 2 200 000
House for sale in Bronkhorstspruit R 400 000
House for sale in Geelhoutpark R 1 280 000
If you are using Internet Explorer 8 or higher, please verify that your Internet Explorer compatibility view settings are not enabled.
For the best browsing experience update to the latest Version of Internet Explorer or try out Google Chrome or Mozilla Firefox.
Please contact our Customer Service Centre for further assistance. Tel. +27 (0)861 111 724