The rise in “semigration” from Gauteng to the coastal areas is causing a shortage of residential units in parts of the Western Cape, according to real estate firms. They are also expecting a drop in interest rates to boost activity in the residential property market next year.
Semigration refers to the phenomenon of people selling inland properties and moving mainly to coastal regions, particularly in the Western Cape. It is a rising trend as more middle-class families seek better services, safety and security.
Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, said coastal areas would continue to see growth next year thanks to semigration, especially in the Western Cape, where many areas are now facing stock shortages in the rental and sales markets because of demand from buyers from other provinces.
“Popular coastal towns like Plettenberg Bay and Knysna are experiencing stock shortages, and many have seen a sharp increase in the number of permanent residents in recent years. There is notable activity north of Durban in areas like Ballito, as well as along the Cape west coast in towns that are a commutable distance from Cape Town.
“In Cape Town’s southern suburbs, the steady rise in demand has led to a drop in the time properties are spending on the market. Well-priced entry- to mid-level homes are being snapped up within weeks, or even days, and there has been a marked decline in the gap between asking and selling price in the past three years,” said Geffen.
She cited Stats SA data which showed that building plans passed for residential developments in the Western Cape increased 22.2% year on year, to the value of R15.4bn last year.
There are deals to be had with real property prices at the lowest levels experienced in the past decade and more distressed property sales coming to market
— Grant Smee, MD of Only Realty Property Group
Geffen expects momentum to continue in holiday towns in the Eastern Cape such as St Francis Bay, where a spike in property sales in the past two years has resulted in supply exceeding demand. She said Port Alfred was becoming increasingly popular with upcountry buyers.
“Although Gauteng is leading in the entry-level market with the most property transactions in the price band up to R1m in 2022, the middle and upper markets continue to struggle, with semigration and emigration being two of the leading drivers,” she added.
Samuel Seeff, chair of Seeff Property Group, said the luxury sector, especially in the Western Cape, performed well in 2023.
“Luxury areas such as the Atlantic seaboard and southern suburbs continued to see strong sales in the super-luxury R20m-plus price band, with a significant number of sales above R20m ranging to R150m this year.”
He said nine of South Africa’s 10 most expensive suburbs were in Cape Town, and three of these boasted an average selling price above R20m: Clifton, where the average selling price is R25m; Bantry Bay, with a R22m average selling price; and Llandudno at R20m. In Gauteng only Sandhurst in the Sandton area makes the top 10, with an average price of R19m.
“We expect the semigration trend to the Cape regions to continue, which will boost that market. The Cape is likely to remain the strongest and Gauteng the weakest, with larger volumes of stock, slower sales and pressure on prices. For example, very little has sold above R18m — only about a handful compared with about 100 sales across Cape Town. That said, the mid-sector below R1.8m will continue ticking over as people will always need a place to live and will always need to sell and buy.”
Despite a robust appetite for mansions in coastal areas, South Africa is in a prolonged buyers’ market as interest rates remain high, buying power shrinks and rising food and electricity costs squeeze incomes. As a result, homes are staying on the market for longer.
Grant Smee, MD of Only Realty Property Group, said in this high interest rate environment, consumers were feeling financial pressure and many were choosing to rent rather than buy.
“There are deals to be had with real property prices at the lowest levels experienced in the past decade and more distressed property sales coming to market. The rental market, on the other hand, is in a strong position as many opt to rent rather than buy in an effort to remain flexible and reduce their monthly overheads.”
Smee said the prime lending rate has been pinned at 8.25% for the past three meetings of the Reserve Bank’s monetary policy committee, and this is the ideal time for consumers to save the money they would have spent on bond repayments.
With the toll that load-shedding took on the economy in 2023 hopefully expected to ease significantly during the course of next year, prospects for growth should improve
— Andrew Golding, CEO of Pam Golding Properties
“So often, we take for granted what a 25 basis point increase can do and it’s the ideal time to build up a buffer. In the new year, when rate cuts do come, this is also the opportune time to put the money saved back into your bond to reduce your bond term. For those who haven’t invested in solar, it’s also good to investigate the various financing options on offer. Homes with solar are in higher demand and are yielding higher sales prices,” he said.
Smee also expects increased demand from foreign buyers for properties in the local market, particularly in the Western Cape. He foresees further demand for properties in smaller coastal towns such as Langebaan, Yzerfontein, Kenton-on-Sea, Cintsa and Ballito.
Andrew Golding, CEO of Pam Golding Properties, expects an improvement in some key residential property metrics from 2023.
“Dominating this improvement in outlook will hopefully be the start of a downward trend in interest rates which nearly always signals an uptick in activity and which, as a consequence, is also likely to herald the start of a cycle of real house price growth. Furthermore, with the toll that load-shedding took on the economy in 2023 hopefully expected to ease significantly during the course of next year, prospects for growth should improve,” he said.
Golding said the property market would have to be flexible in 2024, with more residential developments that offer units for purchase and long-term rentals, “apart-hotel facilities” and mixed-use developments which allows for commercial and residential units.
The FNB House Price Index recorded average growth of 0.5% year on year in November from 0.4% year on year in October. FNB senior economist Siphamandla Mkhwanazi said between January and September new mortgage volumes declined 27%, according to the latest available deeds registrar data. Younger buyers, including first-time buyers, are becoming more despondent.
“The share of mortgage volumes attributed to individuals aged below 35 has declined from the most recent peak of 47.3% in the third quarter of 2020 to 39.7% in the third quarter of 2023. This reflects the disproportionate impact of subdued economic activity and high interest rates on younger individuals, while stronger balance sheets often insulate older individuals.”
