Year-on-year, there has been a shift to a buyers’ market, with fewer buyers, more sellers and reduced sales. In the current market, buyers look for value and tend to favour similar properties for less in lower-priced suburbs. Regrettably, many sellers are still not heeding market-related prices, which of course means that homes take longer to sell. According to the latest FNB Residential Activity report, properties now take, on average, fourteen weeks to sell, up from eleven weeks in the previous quarter. Nationally, property price growth is barely keeping up with 6% inflation, so in real-terms there is little to no growth. For real-price growth, 2016 is likely to ‘break even’.
Demand for properties in Cape Town and the Western Cape continue to outstrip supply. Considering desirable factors such as lifestyle and sea-views and a general scarcity of homes on offer, there is a different level of buyer confidence in this region.
There is a strong sense that there is less crime and corruption, better infrastructure and a well-run province makes the Cape a desirable place to live. However, this comes at a price. With the replacement cost of a property in Cape Town when compared to Johannesburg, it is between 30-40% more. At the luxury end of the market, an increasing part of this demand is coming from executive semigration as families relocate from Johannesburg to Cape Town while maintaining their business interest on the Highveld. The Western Cape and specifically Cape Town will be the star performer with property price growth expected to be at or close to double digits in 2016.
Despite low consumer confidence, there are still sales taking place. Currently, we are in a stable interest rate environment which impacts positively on affordability and sentiment. Fortunately, there has been no noticeable tightening of the bank’s lending criteria. The common denominator in this market is price. In a buyers’ market, sellers are competing with other sellers for fewer buyers. There are quality buyers and banks are lending. How long a property stays on the market and at what final selling price depends entirely on how quickly the seller will respond to the market.
