Western Cape Home and Rental Prices

EmailEmail Print Share

17 Jul 2012

Estate agents in the Western Cape report that the residential property market has improved significantly, however, pricing realism is still lacking.

The FNB report reveals that estate agents report an increase in residential demand activity and they are now more upbeat regarding the Cape Metro than their counterparts in the rest of the country.

According to the FNB Property Barometer Western Cape Estate Agent Survey Q2 2012 report, seller property asking prices are still unrealistically high.

The report reveals that estate agents report an increase in residential demand activity and they are now more upbeat regarding the Cape Metro than their counterparts in the rest of the country.

The Western Cape demand rating for Q2 2012 was 6.18 and the national average rating is 5.87.

Writing in the report, Clinton Martle, FNB Western Cape Property Leader sales manager, says on a year-on-year (y/y) basis, the second quarter demand activity rating was 11 percent higher than the level in the second quarter of 2011.

“This is the first time that we’ve seen positive y/y growth in the demand rating since Q4 2010 and the highest demand rating since Q1 2010 but pricing realism still appears to lack.”

Martle points out that it takes an average of 20 weeks before a property is sold in the region, which could explain why even though agents report an improvement in the market, price realism is still lacking.

The percentage of properties sold at below asking price, has shown a significant decline from an estimated 100 percent in the final quarter of 2011 to 80 percent in Q2 2012.

One would expect an increasing average time on the market to go hand in hand with an increase in the percentage of sellers having to drop their asking price.

He notes an increase in seller optimism, causing fewer sellers to drop their asking price because they are confident of achieving the price they want, and hereby causing the time on the market to remain long.

More indicators of increased optimism and demand strength are found in buy-to-let buying estimates

During and after the recession of 2008/9, as financial pressure on the household sector piled up, non-essential forms of property buying very much took a back seat, and primary residential demand was “king”.

Martle says this is still the case and there has been some mild improvement in buy-to-let buying, suggesting greater confidence and perhaps a gradually improving financial position of a portion of the household sector.

From a low of 4 percent of total buying in Q3 2010, buy-to-let buying in the Western Cape has risen in significance to 14 percent of total buying ain Q2 2012.

Holiday home and buying of homes for relatives’ primary residences remain muted.

A two bedroom apartment at Villa Castello complex in Strand measuring 62 square metres with a single parking bay is on the market through PGP for R395 000. It has an existing tenant paying rental of R2 700 per month.

The report further shows that primary residential buying is down to 82 percent of total buying in Q2 2012 from 93 percent Q2 2010 as well as first time buying.

Martle says using a quarter moving average, the second quarter survey indicates that an estimated 21.5 percent of total buyers were first time buyers, up from 7.5 percent in the third quarter of 2010.

The upward trend in the percentage of first time buyers is also reflected in the increase in the percentage of single people buying homes, and the simultaneous decline in couples’ buying as a percentage of total home buying, he says.

From a peak of 90 percent of total buying in the second half of 2010, buying by couples is now at 75 percent while the number of young buyers has increased.

However, Martle notes that while demand activity has improved, financial pressure in the Western Cape remains very significant with the estimated percentage of sellers selling in order to downscale due to financial pressure at 21 percent in the second quarter of 2012 according to the survey.

The percentage of sellers selling in order to upgrade has increased from 11 percent in Q3 2011 to 19% in Q2 2012.

Selling for emigration purposes was at a low of 2.5 percent of total selling in the first half of 2012, down on recent years and below the national average of 4 percent, reflecting the relatively high levels of confidence in the Western Cape region by South African standards, he says.

Martle says overall, the Western Cape residential property market has improved according to the survey, with an increase in buy-to-let buying and selling in order to upgrade.

Buying and selling property

Pam Golding Properties (PGP) reports that the town on Strand located on the False Bay coastline next to Somerset West and Gordon’s Bay offers extremely competitive prices for buyers and good opportunities for investors.

Two bedroom apartments are priced from as low as R400k while family homes are priced from R1.5 million.

The introduction in January of a new bus route linking the town with nearby Stellenbosch (via Somerset West) has also opened up its property market to new potential buyers.

PGP’s area manager Linda Killick says the bus currently offers a morning peak departure and afternoon peak return, daily priced between R13.75 to R25 per trip depending on frequency of use and purchase of a clip-card. 

“We are very hopeful that the bus service will be a viable option for students, academics, teachers and workers based in Stellenbosch.”

Side view of a home sold in the more affordable area of Boston, Bellville for just over R1 million. Rawson Bellville says this is the average selling price in the Boston area.

Prices in Strand are among the most affordable in the greater Helderberg area, and one can obtain a two bedroom apartment in the town from just under R400 000. 

A mid-level family home with a well-sized garden and a garage can cost around R1.5 million, while a larger home with more luxurious finishes will not cost more than R2.5 million.

At the very top end of the market, a luxury beachfront penthouse can be purchased for approximately R5 million to R6 million. 

Killick says the rental market is also booming with one bedroom apartments priced at R2 000 per month, half of what one might pay in Stellenbosch.

Two bedroom apartments cost R3 000 and a two bedroom townhouse with a garden and double garage can fetch between R4 500 and R5 000 per month.

She points out that affordability is a key concern amid current market conditions and sales figures for the town indicate that the highest demand is in the market for starter apartments and mid-level family homes.

Lightstone figures for the 12 months ending May 2012 indicate that the most popular price range was from R800 000 to R1.5 million, with 134 sales concluded (across all agencies), followed by the bracket from R400 000 to R800 000, which saw 74 properties change hands.

Killick says the highest demand comes from existing local residents who are looking to increase their standard of living, or who want to downscale after their children have left home. 

The town is also popular with retirees, including those moving to the coast from inland areas as well as young families attracted by the town’s lifestyle.

Rawson Properties reports that rentals in Bellville are booming and residential property prices are starting to be firm.

Morne Veer, Bellville franchise owner, says falling property prices are now a thing of the past and certain properties’ values in sought-after areas such as Boston, Chrismar, La Rochelle and surrounding areas are increasing rapidly on y/y basis.

Veer notes that a fairly high percentage of sales activity in the past was the result of owners steadily upgrading and nowadays many homeowners use whatever spare cash they have on upgrading their existing homes or they simply sit tight instead of buying bigger homes.

The communal gardens of a block of flats in Rondebosch - Anne Porter Knight Frank are selling a one bedroom apartment measuring 71 square metres with one parking bay for just under R1 million.

He says prices in Bellville are still affordable, particularly if the buyer stays below the N1 freeway. 

Above this line, 25 to 30 percent  increases per square metre immediately kick in, but below the N1 it is still possible to get an average three bedroom on a 500 square metre plot for between R850 000 and R1 million.

He says 60 percent of all homes sold in Bellville are still below R1 million and almost without exception they are great value in today’s market.

Rawson Properties points out that certain homes a year ago were rented for between R4 500 and R5 000 per month and now these are obtaining rentals of R6 500 per month.

Those priced at R6 500 per month in 2011 now command rentals of between R8 500 and R9 000 per month.

Veer says the general short supply of stock, the new tendency to hold onto homes rather than to upgrade, the lack of land for development coupled with the increasing attractive rentals seem highly likely to send prices up by some 10 percent before the middle of next year.

Meanwhile, Lanice Steward, managing director of Anne Porter Knight Frank says when investing in buy-to-let property, investors should remember the older sectional title developments in Rondebosch.

She points out that there are many new sectional title apartment developments coming on stream in the Rondebosch area.

Steward explains that older sectional title blocks often have high ceilings, well proportioned rooms and very often, if the body corporate has been well managed the accumulation of funds over time helps keep the monthly levies low.

According to CMA data, sectional title trends in Rondebosch show that the average selling price in sectional title units rose from an average in 2003 of R345 000 to an average price of R950 000 in 2012. 

The report shows that there has been a steady increase in prices and even in the really bad times, the average sales price was R1 082 500. 

In addition, Rondebosch figures in this category have been consistently higher than the prices of the rest of the Cape Metropole, she says.  

“If you are considering investing in property, think about getting involved in the student market.”

Steward says if an investor is prepared to run the property themselves, there is a huge return on renting to students from the international market coming to University of Cape Town looking for furnished accommodation.- Denise Mhlanga

About the Author
Denise Mhlanga

Denise Mhlanga

Property journalist at property24.com

Similar Articles

Morningside, Rivonia, Rosebank and Bryanston will see much...

Offering sophisticated retirement living, Lazuli Coastal...

Offering the ultimate seaside retreat, Flamingo Bay is...

View all articles

Top Articles

When decorating as a couples it’s important to make...

Morningside, Rivonia, Rosebank and Bryanston will see much...

Offering sophisticated retirement living, Lazuli Coastal...

View all articles
Top Articles
09 Feb 2016
Buyers are willing to pay a premium for homes near top Western Cape scho...
09 Feb 2016
Teams in the Six Nations Championship will be battling it out on the rug...
09 Feb 2016
A new flexible co-work facility, One Chadwick Co-Working Space, is being...
09 Feb 2016
From revitalising the Boet Erasmus Stadium in Port Elizabeth to restorin...
09 Feb 2016
Actual property prices are expected, even by the most conservative forec...
Get the latest property news.
Select your options:

Your browser is out of date!

It looks like you are using an outdated version of Internet Explorer.

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 Property24 Support Team for further assistance. Tel. +27 (0)861 111 724