Search Property For Sale

Priced out of the market

Google+ Pinterest LinkedIn Tumblr +

Issues of affordability and traffic congestion could see Cape Town lose popularity to second-tier cities

Cape Town may not always remain the premier South African city in which to live and work as rising unaffordability and traffic congestion push people to look for alternatives.

One day these smaller places could steal the limelight, just as Cape Town did from Johannesburg years ago. “Cape Town used to be a second-tier city but then Joburg lost its shine,” says FNB’s commercial property finance economist John Loos.

“Cape Town’s status grew due to its development and economic growth, but now, as a first-tier city, it is expensive and congested.” Closer alternatives for those looking to move out of Cape Town include Stellenbosch, where Capitech has moved its head office and there is a lot of development.

However, Durban, he says, looks to be the next city in line for promotion, followed by Port Elizabeth. The North Coast of KwaZulu-Natal in particular looks to be the new premier region one day, considering its proximity to the airport as well as its roads and infrastructure. Richards Bay, too, could potentially rise up in the ranks.

“What really drives a second-tier city is its growth. People must want to go there,” Loos says. In this respect Koega has “done a lot” for Port Elizabeth.

The migration towards second-tier cities is a global trend which, although taking place much more slowly here, is inevitable. In a previous Weekend Argus article, Dion Chang, a futurist and trend analyst at Flux Trends, said a significant number of younger people in the US could not afford to live in the big metropoles and were moving to secondary cities the equivalent of Port Elizabeth and George.

Although this trend would take longer to catch on here, Chang predicted secondary cities would become more popular.

Erwin Rode of Rode & Associates says South Africa has not yet reached the stage where big companies, and therefore people, are moving towards second-tier cities.

“I know in California in the US it is happening, brought about by extremely expensive housing, which is partly the result of administrative restrictions that make the supply of new houses inelastic (supply not keeping up with demand).

“Examples are compulsory inclusionary housing requirements and environmental impact assessments that delay construction. “Both push up the price of new construction and, together with superlow interest rates, have been pushing prices up to levels where a new generation cannot afford housing, hence the flight to neighbouring municipalities.”

He says this is an “unfortunate development” as it lengthens commuters’ travelling time, with all the associated ecological and social costs. “The lesson South African politicians and town planners can learn from this is that highly prescriptive policies on the supply of new houses is not a free lunch.”

Property data indicates a “kind of semigration” to second-tier areas, especially in the top segment, says FNB senior economist Siphamandla Mkhwanazi. This is mainly a result of affordability.

“We are seeing a rise in building loan applications, predominantly from affluent individuals who still find land relatively more affordable in second-tier cities.” 

Mkhwanazi says technology and traffic congestion also play an important role in determining whether people are looking at the option of moving to other areas and still run their businesses, provided they can afford to do so.

“We believe the trend will continue. As long as second-tier cities provide opportunity in terms of economic activity, infrastructure development and access to amenities, and demand exists for affordable housing, there will be some movement in that direction.” Some secondary cities Mkhwanazi says are seeing an increase in popularity include Kimberley, Port Elizabeth, Rustenburg, and Witbank. 


About Author