Gauteng continues to draw first-time buyers, but Western Cape wins on repeats
The year 2016 was another bumper one for the Western Cape in terms of strong net inflows of repeat homebuyers from the rest of South Africa, a trend that takes skills and purchasing power to that region’s economy, says John Loos, household and property sector strategist.
“This trend has become nothing short of spectacular, measuring 15.7% of the province’s repeat buying, having accelerated steadily since 2009, and now dwarfing the net migration rates of the other eight provinces,” says Loos.
“A competitive advantage, from a point of view of attracting skilled labour, is not only about a region’s ability to attract inward migration, but also about retaining current residents. Here, the Western Cape now shows superiority too, with only 7.6% of its repeat home buyers leaving the province in 2016.”
By comparison, FNB estimates Kwazulu-Natal’s percentage at 15.2% and Gauteng at 16.2%.
Loos believes the trend in the Western Cape “in part represents a strong desire on the part of the affluent to relocate for quality of life; purposes, a desire that appears to have grown stronger in recent years, some moving for employment prospects, but many relocating for retirement purposes”.
By comparison, the country’s largest economic province, Gauteng, saw a marked deterioration in its net outflow percentage of repeat homebuyers, and only Mpumalanga had a worse net outflow percentage.
“The trend should be of concern for Gauteng in the sense that it may battle to maintain its status as the fastest growth economy over the longer term, should the net outflow of repeat buyers (along with their skills and purchasing power) continue to deteriorate further.
“However, we don’t believe Gauteng’s situation is as bad as it appears, because we believe high first-time buying rates in that region are in part reflective of a big economic opportunity that continues to attract young skilled labour market entrants moving to the region to start their careers. In addition, Gauteng’s superior home affordability can boost such a young buyer inward migration.”
The Western Cape, on the other hand, while still experiencing something of a “golden era”, needs to be concerned with finding a solution to deteriorating home affordability. This provincial economy is a services dominated one, heavily reliant on skills attraction and retention.
To sustain this net inflow of repeat homebuyers while retaining more financially constrained first-time home buyers, the region has to find ways to utilise land more effectively (which would include densification with good urban planning) in order to create greater residential affordability, while also finding a solution to rapidly mounting traffic congestion. For the time being, though, Gauteng’s and the Western Cape’s problems are relatively nice to have, compared to the other seven provinces. From 2011 to 2015 (2016 data is not yet available), Gauteng had the fastest average annual economic growth rate (according to StatsSA GDP data) of 2.56%, followed very closely by the Western Cape’s 2.54%.
The former, we believe, benefits from younger skilled migrants, who would often be aspirant first-time buyers, the latter benefiting from older skilled and often affluent repeat home buyer migrants. It is the other seven provinces that have the greater challenges, battling to attract either of these two skilled migrant groups in large numbers.