By Ashleigh Brown, journalist, Justmoney
The weak Rand and interest from international buyers has resulted in a property boom in the central business districts of major cities in South Africa. While the rise in prices has come as good news to sellers it has resulted in local buyers, particularly first time buyers, being unable to access homes in these sought after areas.
In Cape Town over the past year the Atlantic Seaboard has seen an increase in property sales. This is not only due to the weak Rand - which is a big draw for many international buyers - but also because of the extensive media coverage Cape Town has received.
The increase in property sales along the Atlantic Seaboard (ASB) has also resulted in a price increase in the CBD and surrounding areas.
“Once prices are rising on the ASB one will find that this will affect prices positively within the City Bowl and CBD areas,” said Stefan Hauptfleisch, a residential property analyst from Cape Property Price Trends.
Commentators believe the prices of the homes located in the ASB area are on the incline stage of a boom phase, which started at the beginning of 2011. “When there is an expansion of output, income, employment, prices and profits, there is also a rise in the standard of living. Generally when there is more capital available, within households, it goes not only to higher living standards but also to reinvest into new homesteads. This causes a natural high level of demand,” said Hauptfleisch.
Supply and demand
Sales have gotten to the point where the demand outstrips the supply, which means sellers have enjoyed favourable outcomes. Apartments under R3 million are being sold quickly, while commentators say larger properties under R10 million are also changing hands rapidly. But those are the ‘cheaper’ properties along the ASB.
“The reality is that is unusual to find a studio apartment for under R900, 000,” said Steven Delit, a Property Agent from Re/Max.
Boom spreading to surrounding areas and cities
The CBD and ASB property boom is also having a positive effect on surrounding properties in the Southern Suburbs and the South Peninsula, which are also seeing an increase in sales.
Though the property boom is not exclusive to only Cape Town homes. Other South African cities, such as Johannesburg and Durban, have also seen an increase in property sales, thanks to interest from international buyers.
Most of these sales are for investment purposes and leisure purposes. Lew Geffen, Chairman from Sotheby’s International Realty pointed out that owning second homes was becoming a trend again.
Impact on low income households
“It is estimated that there is a 30,000 shortfall in the number of student accommodations in Cape Town, so the cheaper (and less attractive) studio and one bed apartments are snapped up straight away for rental,” said Gary Freeman, sales manager at Rawson Properties.
Furthermore, for lower to middle income buyers, it means it is more difficult for them to get a bond to either get on, or move up, the property ladder.
“Salaries have not increased at the same level as property prices. But this isn’t just a South African/Atlantic Seaboard issue, it is worldwide in most western societies,” added Freeman.
How to get onto the property ladder:
• When you buy try and put as much of a deposit as possible - it minimises your bond repayments.
• Do your homework – Lew Geffen advises buyers to look at least 20 properties in order to make an informed purchase.
• If you need a bond, then make sure that you qualify for one so that you know precisely what you can afford, advised Freeman.
• In South Africa, the buyer pays all the legal fees and transfer costs which are in addition to the agreed purchase price. Make sure you know what these are when you make an offer.
• If you buy a property at auction, you buy it “Voetstoots” meaning “bought as seen” so there is no comeback afterwards if you discover the property has a problem and you cannot prove that the seller knew about the problem and failed to disclose it.