12 Aug 2010
Everybody wants a huisie by die see that they can tootle off to in December or even over long weekends and regard as an investment that will save and make them money in the long-run.
But with the after-effects of the recession still lingering and household debt burdens stubbornly high, this prospect seems like a distant hope to most middle class folk and even to a lot of high-income earners.
But is it really? And how viable is a coastal property from an investment point of view?
Property24 investigated some of the hotspots along the coast of SA to find out exactly what these properties cost, how the property markets in the areas are faring, if they really are out of reach and what market dynamics are at play in these areas.
Graham Anley, broker/owner of RE/MAX Coastal, which serves the coastal holiday towns on the Garden Route stretching from Wilderness through Sedgefield, Knysna, Plettenberg Bay to Natures Valley, says these areas have been particularly hard-hit by the downturn in the economy.
He explains that this is because these areas are mainly holiday resort towns where the market predominantly consists of luxury holiday homes. “Sales volumes are down dramatically and prices achieved are generally down to levels experienced in 2006,” he says.
But, having said that, Anley notes that it is certainly a strong buyers market and there are great investment opportunities for the shrewd property buyer.
Anley explains that in the midst of the boom, before the implementation of the National Credit Act (NCA), many buyers purchased two or three investment properties having obtained 100% bonds, with the intention of holding onto them for a short period of time and aiming to take quick profits.
“A number of these investors are now struggling to meet their bond commitments and they are being forced to sell these properties at prices which, in some instances, are substantially less than what they paid for them. This is providing fantastic buying opportunities for investors seeking to acquire a holiday property in prime areas.”
Anley says that pricing for an entry-level home starts at around R1,2m, which would buy a two-bedroom, two-bathroom home with open plan living areas, situated in a sought-after area, close to the beach. “In Knysna entry-level apartments in the CBD come in at around R449k including VAT.”
Talking about the buyer mix in these areas, Anley says that as the towns in which they market properties are predominantly coastal holiday towns, 90% of their business is conducted with upcountry or Cape Town buyers looking for holiday homes. “Buyers are looking for and are finding bargain properties being marketed by distressed sellers, or are negotiating great deals from bank portfolios of repossessed properties.”
Adrian Goslett, CEO of RE/MAX of Southern Africa, says there has been a very slight increase in the leisure section of the property market and that majority of buyers in the Garden Route are cash buyers. “The market is as low to the bottom as it has been for many years, which means that there is value to be found in many properties currently on the market. Interest rates are at an all-time low and the economy as well as the property market are on the upturn.”
Anley says the Garden Route has not yet experienced the upward trend as the luxury market generally lags behind in a property recovery. “We therefore foresee our market starting to follow this upward trend in the near future. This means that there has never been a better time to buy coastal properties than now,” he says.
Seeff property analyst Stefan Hauptfleisch has reviewed property trends for Camps Bay for the period 1 January 2005 - 31 December 2009 in terms of sales of houses in property price bands, property price growth, annual sales and monthly property price variations. “It shows that Camps Bay has experienced a very healthy average of 14,70% year-on-year (y/y) house price growth since 2005.”
Only one sale took place at above R30m, and that was during 2008 at R32,250m. In the price band between R10m and R30m, 42 houses were sold from 2007 to 2009 to the value of R639,476,400.
During 2007, 12 properties in this price band were sold for R158,280,000 – an average price of R13,19m. This figure increased dramatically during 2008, when 15 houses were sold to the value of R239,463,400, 51% higher than the value of total sales in 2007. This caused an increase of 21,04% y/y in the average house price in the R10m to R30m price band – from R 13,19m to R15,964,560 in 2008. In 2009 the average house price in this band was R16,115,200 – a marginal increase of 0,94% from 2008.
In the price band R2,5m to R10m a total of 189 properties were sold from 2007 to 2009 to a total value of R1,136,581,755. Most sales in this popular price band were recorded during 2007, with 101 houses sold (R602,710,955). This figure deflated by almost 57% to R262,153,800 during 2008, causing the average house price in this price band to decline by -1,36% from R5,967,435 to R5,958,041. Total sales in this price band increased by 4% to R271,717m during 2009 while the average house price increased by 2,44%.
In terms of property price growth across the board, Camps Bay homes has experienced a very healthy average of 14,7% y/y house price growth since 2005, the best year having been 2008 with 30,26% and the only negative trend being in 2009 with a very small decline of 0,8%.
This shows that Camps Bay is a sound upmarket investment destination, albeit with slower price growth of late, which bodes well for buyers who are looking to get a foothold in this market.
Pam Golding Properties (PGP) area principal for Scottburgh on the KwaZulu-Natal South Coast, Stefan Nel, says the areas of Umkomaas, Scottburgh and Pennington through to Bazely remain popular as holiday home destinations, with the R900k to R1,3m price range the most active and representing good value for money.
Commenting on the residential property market in general, Nel says the mid-South Coast is receiving substantially increased interest compared to last year. “Interest from the KZN North Coast is increasing, attributable perhaps to the increased traffic and noise levels since the opening of the new King Shaka International Airport, as well as the good value for money of property here,” he says.
He says the KwaZulu-Natal mid-south coast areas including Scottburgh and Pennington are in huge demand among those seeking to acquire homes for retirement purposes, and could well become a retirement mecca, particularly for upcountry buyers.
“With a waiting list of 800 at the local Umdoni retirement village and 114 units currently being built and anticipated for completion by December this year (2010), this area of the south coast is a destination of choice for upcountry residents as well as those currently living in Pietermaritzburg and the KZN Midlands.”
Nel says several other retirement projects are in the pipeline and in various stages of planning, which will cater for consumer requirements across a broad spectrum. “One of these is a retirement village planned at Elysium, a tranquil and scenic hamlet located between Mtwalume and Ifafa Beach, where approximately 500 stands will be priced from approximately R500k.”
Moving on to the North Coast, Clive Greene, area principal for Pam Golding Properties (PGP), says leisure home sales in the area are definitely picking up.
As indication of the role that affordability plays in the current property market, two new affordable developments starting at R499k for a single-bedroom apartment have been launched. Sheffield Manors, situated in Sheffield on the beach side of the N3, is aimed at first-time home buyers, enabling them to gain a foothold in the market. This development will comprise a total of 321 units – 126 in phase one and 195 units in phase two.
Apartments range in size from a studio apartment of 40sqm priced at R499k to three-bedroom units priced from R879k to R1,089m.
The second development is Manor Estates, located near the Umhlali golf course just three kilometres from the centre of Ballito and with easy access onto the N3 and the old R103. With a total of 316 units, the development includes 104 units in Manor Mews, ranging in price from R499k for a one-bedroom to R699k for a two-bedroom unit. Construction is well underway.
The development also includes a further 117 units in Manor Gardens, 60 units in Manor Views and 35 freestanding homes in Manor Lakes. Prices start from R1m for a two bedroom home.
"These homes also offer attractive returns to investment buyers as there is a steady demand for this type of affordable rental unit, starting from R3,500 per month for a one-bedroom apartment," says Greene.
Trudy van der Vlies, broker/owner of RE/MAX Marine which represents the northern KwaZulu-Natal (KZN) areas of Richards Bay, and surrounding Empangeni, Kwambonambi, Esikhawini and Ngwelezane, says sales volumes have been excellent since the beginning of 2010.
“There has been a good and consistent general demand for property in the area, and the prices achieved have been fair considering that there is a surplus of stock on the market. An entry-level home, such as a two-bedroom apartment, for example, will generally fetch in the region of R390k to R540k. The average three-bedroom, two-bathroom home, with a single garage, will sell in the region of R800k to R950k.
“And at the upper-end of the market, modern homes set on large stands and featuring top-end finishes, will fetch between R1,4m and R4m.”
She says Richards Bay has various drawcards for upcountry or other holiday buyers. “Richards Bay is one of the closest seaside destinations from Gauteng, the climate is warm and tropical all year round, and real estate in the area offers great value for money.”
Comparing the warm and tropical East Coast to the West Coast with its frigid Atlantic ocean, there seems to be just as much variety for a broad range of eclectic tastes.
Linda de Boer, broker/owner of the recently acquired RE/MAX Blue Waters franchise in Lamberts Bay, says the property market in Lamberts Bay has been performing exceptionally well considering the economic climate, and notes that it is the well-priced homes that have sold quickly.
De Boer says that entry-level homes in Lamberts Bay can be acquired for around R700k, while middle of the range properties sell from R1m upwards and the most expensive homes in the area have price tags of around R3m.
“Buyers are specifically looking for holiday homes or investments (rental property) and Lamberts Bay does have a shortage of rental homes,” says De Boer.
Elizma Breitenbach from Fine & Country’s Langebaan branch says many permanent home buyers gravitate to Langebaan to bring up families away from big city life. “Overseas investors flock here for the lagoon which offers fishing, kite-surfing and yachting. Further bolstering the area’s appeal is the fact that its character isn’t likely to alter any time soon as commercial and retail property space is somewhat limited.”
She says entry-level, full-title properties currently sell for between R1m and R1,5m. Sectional title properties are moving at between R700k and R950k. “Demand for rentals is high. Two-bedroom flats are leasing for R2,500 pm and three-bedroom homes are leasing from R4k pm upwards. Contract workers and an ever growing holiday rental market is also catalysing rental demand,” says Breitenbach.
She says akin to the rest of the country, Langebaan’s property market took a knock during the recession. “The difference between asking and selling prices was significant and fence sitters prevailed.”
Sandelé Wilkinson of Fine & Country in the ever-popular Paternoster says the town’s property scape comprises mainly of holiday homes, cottages and flats attached to houses which are typically rented out to holiday makers. “Two types of property are currently selling in Paternoster: Entry-level stands and upper end beachfront houses.”
Entry-level stands situated 400 metres away from the beach are selling for between R350k and R850k. Top-end beach front houses are selling from R5,5m upwards.
Other properties on the market include full-title properties consisting of three bedrooms and two bathrooms priced from R1,5m in the suburb of Crow’s Nest. Full-title homes with full sea views situated away from the beach cost in the region of R4,5m. “Sectional title properties range between R2,2m and R2,7m.”
According to Wilkinson Paternoster’s property market was restrained largely by fence sitters during the recession and asking prices typically differed by between 15% and 20% at the time.
“As for a long-term rental market, the town doesn’t really have one as such,” says Wilkinson.
“The majority of homes are leased out on a short-term holiday basis. Those few homes which are available on a long-term lease basis typically cost between R5k and R7k pm.”
So while it’s clear that a holiday home in Camps Bay or other high-end areas will remain a quixotic hope for most of us, there are reasonably-priced coastal areas in SA that will cater to a larger spectrum of buyers who dream of hogging their own piece of soil adjacent to the ocean. – Eugene Brink
Readers' Comments Have a comment about this article? Email us now.
Great article, buyers should look at Beachview 30 mins outside of PE. Houses for sale there below R 1 million and lovely sea there with whales and dolphins every day, buck, moneys, no one knows about it and it's very good value. – Angela Graham
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