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'Big upturn' in R1m to R3m Cape Town Northern Suburbs property market by mid-2020

06 Dec 2019

The prediction of “green shoots” marking the recovery in the Cape Town Northern Suburbs residential property market are wholly valid.

This four bedroom, two-and-a-half bathroom house in Sonkring, Brackenfell, has modern finishes and is in a secure neighbourhood. It is selling for R2.599 million - click here to view.

So says Rowan Alexander, Director of Alexander Swart Property, noting that the “first prolific flowering of these green shoots should be seen from the third quarter of 2020”.

Alexander says 2019 should be seen in “two halves”. “In the first half of the year a range of factors following the 2018 drought in the Western Cape, a major disrupter, had caused concern. The chief being the ongoing reports on State capture, many of which indicated that the Zuma-Gupta alliance had led to massive illicit personal enrichment from almost every State department. It then became clear that this rip-off philosophy had infiltrated not only some of the provincial administrations, but also many of the municipalities. Those looking for more positive signs in the economic outlook, had to deal with the threat of land expropriation without compensation, the apparently unsustainable increase in the SA, Eskom and other state-owned enterprises’ debt, the fall in the value of the rand, the very low GDP growth rate, the worsening trade deficits and a growing lack of employment and dire poverty – all of which could lead to SA declining into junk status in the global economy.”

Conservative investors should align themselves with the R1.5 million to R3 million market where the action will be seen in the coming year, especially if homes are secure or in gated security estates

In the residential housing market these negative factors led to a large number of South Africans (as many as 16% of all home sellers in the price brackets above R3 million at one stage) trying to sell their homes in order to emigrate or to raise funds for placing offshore, says Alexander.

The election, however, proved to be a turning point, he says. “Our first hopeful sign in a long while. The choice of Ramaphosa, known to be pro-business and pro-private enterprise, first as the leader of the ANC and then as President, boosted confidence and the gears began to become aligned.

“A slight but nevertheless noticeable property upturn in the second half of the year was brought about by many upper-middle and upper-bracket owners who had listed their homes for sale but had received either no or only very unsatisfactory offers, withdrawing their homes from the market.”

This brand new two bedroom apartment in Protea Heights, Brackenfell, has just sold and was on the market for R1 358 900.

“This, in turn, made buyers begin to realise that their choices were now more limited and their ability to bargain more restricted - which created a sense of urgency among them that we had not seen for some time.”

The housing sector most affected by the difficult conditions were homes priced above R3 million - and the higher the value, the more they felt the absence of the serious buyers. It became quite commonplace to hear of homes brought to the market at around R4 million selling at a discount of R800 000 or more, or not finding a buyer at all, he says.

Some R6 million to R12 million homes have stuck on the market without success, says Alexander. “These upper bracket problems inevitably had a negative spillover effect on the sub-R3 million bracket. For several months’ agents saw extended sales periods and deals done at 5 to 10 % discounts in this formerly popular sector.”

The upper bracket, especially houses in the R3 million to R5 million range, offer great long-term prospects: those who buy now will do so at huge discounts

But Alexander is now confident that by June 2020 this category of housing will be on a marked upward trend - the anticipated revival heralded by the recovery “green shoots”. This, he adds, is already being assisted by the banks’ new willingness to lend money for bonds on easier terms than previously. Suitable first-time buyers can, for example, now get from all the major banks, 105% loans which do away with the need for a deposit and cover the legal and bond application costs.

Alexander advises conservative investors to align themselves with the R1.5 million to R3 million market where the action will be seen in the coming year, especially if the homes are very secure or in gated security estates and\or largely maintenance free.

Such homes will command premiums in the coming year, he says.

This home in Plattekloof Glen, Goodwood, offers three bedrooms, two bathrooms and is selling for R2.395 million - click here to view.

And what about any no-go predictions, or warnings for the future? He says there are now clear signs that the sectional title market will be forced to accept vacancies and big sale discounts in the coming year; in the view of many there is now an oversupply.

“What was once the best investment category, now has too much stock on hand,” he says. However, investors must accept that these trends are cyclical and that better times will return. He predicts, by 2022 good returns will again be the norm in this market.

The upper bracket, especially those houses in the R3 million to R5 million range, does offer great long-term prospects: those who buy now will do so at huge discounts and if they can afford to wait that long, could see impressive price rises in times ahead. 

This, Alexander says, is the right market for the bold speculator, but the conservative investor should stick to the R1.5 million to R3 million bracket.

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