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The slump in the property market has led to price adjustments, and buyers can now look at desirable suburbs

It seemed it was a bubble that would never burst, but since mid-2018 the Cape Town property market has seen a significant shift downwards, and while still high, it certainly has felt a price correction.

This has shaken up the pricing of homes for sale and to let, leaving owners with little choice but to adjust their prices or face the risk of properties sitting on the market or staying vacant. This year, for the first time in years, areas once out of bounds for first-time home buyers, such as the Atlantic seaboard and the City Bowl, have started to slowly re-emerge on the market. That is, if buyers are prepared to live in a small space, and sometimes without parking.

But, is it wise, if you have only R1million or R1.5m, to buy in an exclusive area? Or should buyers instead venture further out to get more bang for their buck?

Seeff’s Adrian Mauerberger, who works in the luxury segment in Bantry Bay, Fresnaye, Sea Point, Three Anchor Bay and Green Point, has this old wisdom: Buy the worst apartment in the best area. “If it means buying a storeroom in Sea Point because that’s all you can afford, or a 38m² studio, just make sure it’s in the best area,” he says. “If you buy in an area where there has been absolutely no growth, you are not doing well.

“Your ultimate aim when investing in real estate is capital growth, and that is what the Atlantic seaboard has always offered.” Susan Watts, broker/manager at Re/Max Living City Bowl, says there are very few properties in the City Bowl in that price range, but she suggests looking at something small in Woodstock.

“I have a personal affinity for the Woodstock and Observatory area. They are really nice and integrated suburbs. The area is fun, vibey, young, and with lots of different kinds of people,” she says. Jeremy Barnes, Greeff Properties South Peninsula regional manager, advises those on a budget to look at the south peninsula.

“The range of pricing in Simon’s Town can go from sectional title apartments at the bottom (close to R1m) to the top end, with magnificent homes on the water’s edge for around R20m.” Barnes says the most common objection from potential buyers is: “It’s too far.”

“Our response has always been: ‘From what?’ Yes, if you are working in the City Bowl, it is too far to battle traffic. But if you work in the southern suburbs, it’s not.” In the past, there was very little in terms of retail or medical services in Simon’s Town.

“But with the new development at Harbour Bay, that has all changed,’ Barnes say. “There is now convenient shopping, chains, optometrists, hairdressers, restaurants and, most importantly, a medical centre. Simon’s Town is becoming more of a residents’ destination than a holiday town.


Buck the trend: Find the growth

Unlike more expensive properties, cheaper ones are showing real growth. Picture: Supplied

While overall real property prices are in decline, low-income and lower-tomiddle-income properties are bucking the trend. The FNB Property Barometer for June shows property prices increased by only 3.3% year-on-year in May, while South Africa’s latest consumer price index (CPI) inflation stood at 4.5%.

This means property prices have dropped by 1.2% in real terms. However, while average property prices are in decline, low-income properties (average R365 000) show 16.3% price growth. The lower-middle income segment (average R638 200) saw 6.8% growth, which is 2.3% above inflation.


Townhouses are in demand

Market in cheaper homes in Cape Town has taken off. Picture: Ashley Jurius

Since the election, the market in the R800 000 to R1.5 million bracket has taken off and is now the strongest in three years. This price range is set for an extra surge as confidence starts to pick up in the market, believes Rowan Alexander, director of Alexander Swart Property.

The latest FNB House Price Index, says Alexander, also shows a high percentage of sellers dropped their prices to clinch a sale in the first quarter of this year.

Throughout greater Cape Town, but particularly in the northern suburbs, the biggest current demand is in the section which is experiencing the greatest shortages, namely townhouses in security estates priced between R1.5m and R2.5m. Also much in demand are sectional title apartments in security estates priced between R1m and R1.4m, says Alexander.


Upmarket under pressure

MAKE AN OFFER Don’t be afraid to offend the seller because it’s a business deal. Picture: Tierra Mallorca

FNB’s sub-regional indices reveal softening prices across virtually all subregions, with the upmarket sub-regions in and around the Cape Peninsula being the hardest hit.

The most expensive sub-region in the Cape Town metro, the Atlantic seaboard, has seen its average house-price growth plunge from a multiyear high of 25.5% y/y in 1Q16 to an alltime low of -5.1% by 1Q19. The sub-region was the first to slide into contraction.

The deflation appears to have spilt over to the rest of the regions near Table Mountain. The City Bowl, the economic hub of the region, slid deeper into contraction in 1Q19, registering -2.0% y/y from a mild contraction of 0.2% in the previous quarter.

The southern suburbs (incorporating suburbs such as Claremont, Newlands and Observatory) followed suit and contracted by 2.4% y/y in 1Q19, from a peak of 15.4% y/y in mid-2015. The eastern suburbs (incorporating suburbs such as Woodstock, Maitland and Pinelands), which for some time held up better than the rest of the regions surrounding Table Mountain, declined by 4.2% y/y in 1Q19. 

Ask questions, be thorough, be cheeky, say top property consultants

PRICE PLUNGE Has the property bubble burst? Figures show softening prices in sub-regions. Picture: Supplied

Slow house-price growth, coupled
with the over-supply of properties on
the market, means first-time buyers
are in a good position to snap up a
brilliant deal and climb on the property ladder.

Mpho Ramatong, housing schemes
channel head at FNB home finance
division, says while overall purchasing
activity is down, the proportion of
first-time buyers has “trended up” in
recent months, reaching an estimated
22.7% in the first quarter of this year.
But before you sign on the dotted
line, ensure your first property purchase goes smoothly.

This advice from those in the know:

● Ask to see your agent’s certificate:
Some agents trade without a licence
so that means there is no protection
for you as a client if you choose to
work with them. Susan Watts, broker/
manager at Re/Max Living City Bowl,
hopes the Property Practitioners Bill
(which assists in ensuring people who
are not properly licensed can’t trade)
will put a stop to that. (See below).
“The agent has to hold a certificate
for the current year,” she says. “Clients
can ask to see a certificate, the same as
a traffic officer can ask for a driver’s
licence.”

● Get as much information as possible: If you’re thinking of a sectional
title property, have a fundamental
understanding of the running behind
the scheme. “Every agent should be
able to provide the latest financials,
minutes from the last annual general
meeting and the conduct rules for
the building,” says Sea Point market
specialist, Lyonelle Venter of Jawitz.
“Otherwise you can get caught out
in special levies. For example, if you
read the AGM minutes you might see
there’s a problem with the lift.”

● Don’t buy a new car: “Set up a
good record with the bank by not
overextending yourself,’ says Jill Lloyd,
area specialist in Rondebosch and
Claremont for Lew Geffen Sotheby’s
International Realty.
“Someone came in a little while
ago and said ‘I’m sure we’re good for
credit because we’ve just bought a new
car’. This is like the kiss of death for
someone buying a house. The credit
for buying a car is very much easier
than buying a house. They’ve borrowed the money for a car, which
takes money away from their available
income.”

● Be cheeky: Don’t be shy to put in a
low offer, says Watts. “If the property is
on for R3 million and you fall in love,
but can only afford R2m, offer R2m.
“Don’t be worried that you’re
going to offend the seller. It’s a business decision. The seller just says no if
they don’t like the offer. If you don’t
get it accepted, move on to the next
property.”  

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