Repeat buyers generally seek to move to bigger and better properties
We are at the start of 2018, and the new spirit of confidence in the country is already being reflected in the property market, with increased sales and more people looking to move to bigger and better homes.
Even in Cape Town, experiencing a dire water crisis, the demand for property remains high.
The increase in property sales is being seen all over the country and in all price brackets, says Berry Everitt, chief executive of the Chas Everitt International property group. There is also a rapid re-emergence of a pattern of upgrading.
“Instead of trying to downsize, an increasing number of repeat buyers are now seeking to move to bigger and better homes and, in the process, keep more of their wealth in South Africa. There could hardly be a better time for them to do so in real estate terms.”
Everitt attributes this to two main reasons, the first being that home prices are rising faster at the lower end of the market than at the upper end, creating an unusual opportunity for astute owners to “sell for more and buy for less” as they move up the property ladder. The second reason is that there is a “very substantial differential” between the cost of pre-owned homes and the cost of comparable new-built homes.
“This means there is plenty of margin for renovation if your preference is for traditional older homes and large gardens in blue-chip suburbs.”
It is currently possible to buy heritage homes for little more than the value of their stands, and then spend R2 000/m² to R3 000/m² on modernising, improving, and securing them without danger of over-capitalising. This is because newly developed homes in the same areas are selling at up to R8 000/m² and R9 000/m², not including the land costs.
Many new construction projects were announced during 2017. With significant investment being made in the property industry, more is expected in 2018, says Nicholas Stopforth, managing director of Amdec Property Developments.
“Properties in Amdec’s new urban precincts continue to sell, and demand is higher than ever.” In Cape Town, for example, he says demand for property remains high despite the water crisis. The Mother City continues to be an attractive market for international investors, and locals who are still optimistic about the state of the country.
“We are seeing a lot of interest in properties on the Foreshore and Atlantic Seaboard areas, and there are significant opportunities for capital growth in the city. The Yacht Club development at the Roggebaai Canal precinct at the entrance to the Waterfront, for example, launched in January 2016 at R48 000/m² and the last unit was sold at the end of 2016 for R75 000/m².”
Stopforth believes if investors in the development were to sell now, they could achieve more than R75 000/m².
Similarly, Amdec’s Harbour Arch development on the Foreshore saw investor packages starting at R48 000/m² and now selling up to R70 000/m².
In terms of trends for this year, Stopforth says he envisages more youth moving into city centres due to traffic congestion.
“People, and in particular young people, don’t want to sit in traffic for hours every day. There is a strong demand for properties in the CBD from young professionals trying to simplify their lives.”
With space in city centres being a limited resource, the only way to cater to the demand is to create new urban precincts, and Stopforth believes mixed-use precincts will be the biggest property trend in 2018. However, these schemes need people to support the restaurants, retail outlets and hotels, and hold meetings in cafes and bars.
To meet their clear demand for inner-city properties, it is essential that developers create products that are affordable for young professionals. For these buyers,Stopforth says the best way to get a good price in such developments is to invest off-plan.
“Get in at the beginning, when developers are looking to get a project off the ground with initial sales before the risk is gone and the prices go up.”