Despite the rising interest rates, experts are still forecasting small price increases for South Africa’s property market.
And several panellists on the Finder.com’s latest SARB Repo Rate Forecast Report, expect to see Cape Town property prices increase the most.
This is despite the series of interest rate hikes.
University of the Free State associate professor in banking, Johan Coetzee, thinks prices in Cape Town will increase by 7%, far higher than his predictions for the other cities included in the survey, with Johannesburg, Pretoria, and Durban set to see small increases of just 3-4%.
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ETM Analytics co-head of financial markets, Kieran Siney, gave a more modest forecast for Cape Town with just a 2% increase, however he expects even smaller increases in cities like Soweto and Port Elizabeth (1% each) and small price drops in other parts of the country, like Johannesburg and Pretoria.
Nedbank analyst Reezwana Sumad thinks Cape Town and Durban will see the biggest increases (6% each), while predicting 1-3% increases for cities like Soweto, Pretoria, and East London.
The forecast increases in Cape Town are reflected in the boom in residential construction in the Western Cape, which increased by R7.4 billion in January to June of 2022 compared to 2021.
And, property sector strategist at FNB Commercial Property Finance, economist John Loos says there is a likelihood that the Western Cape’s annual building plans passed total for 2022 may exceed those of Gauteng for the first time in recorded history.
This is significant, he says “because Gauteng is still by far the largest provincial economy as well as the province with the largest population”.
Loos believes the shift in relative share of the development market move away from Gauteng towards the Western Cape and to a lesser degree KZN points towards a longer term “economy shift” towards the coastal regions.
Jackie Smith, head of Buyers Trust (a subsidiary of ooba Group) says the Western Cape is currently the region experiencing the most home buying activity.
Not only that it is also the region which has the highest average deposit coming in at 17%. The national average for a deposit on a home is 7.8%
Smith says this could be attributed to “increased semi-gration and the scarcity of property supply in the region, resulting in home buyers needing to put down a larger deposit to secure their dream home".
Samuel Seeff, chairman of the Seeff Property Group says the average transaction price for the Cape Metro stands at R1.8 million (2021) compared to R1.47 million in 2015. In 2022 it currently stands at over R2m “which could be due to strong activity observed in the upper price bands this year”.
Ross Levin, licensee for Seeff, adds that the strong performance of the Atlantic Seaboard and City Bowl luxury property markets seen in 2021 escalated further this year.
Sales for the first seven months was over R5 billion, well ahead of what we have seen in recent years and for the first time in years, “we are now seeing property stock in short supply, even in high-end areas such as Fresnaye, Bantry Bay and Camps Bay", he says.
Added to that the Western Cape province featured prominently in the latest Pam Golding Residential Property Index, remaining the strongest major regional market with house price inflation of +5.9% in July (2022) and 6.32% for the year to date.
While growth in house prices in the other major regions continues to lose momentum, in KwaZulu-Natal house price inflation appears to be stabilising at +5.3% for July and for YTD. In Gauteng, house price inflation has slowed to +3.1% for July and 3.6% for YTD, said Dr Andrew Golding, chief executive of the Pam Golding Property group.
Old Mutual Multi-Managers strategist Izak Odendaal says the Western Cape benefits from being “financially stable, better managed and more investor-friendly compared to other provinces”.
“This is particularly true when comparing Cape Town with other metros. The remote-work trend also seems to benefit coastal provinces at the expense of Gauteng.”
EFConsult chief economist Frank Blackmore agrees the boom in the Western Cape can be attributed to its better governance, which leads to better quality of living.
Visiting professor at Wits Business School, Jannie Rossouw, says the boom has happened in the Western Cape over other areas due to the government’s investor-friendly policies.
“The Western Cape has a DA government with a business-friendly policy approach. The result is that the Western Cape is an attractive investment destination.”
* Finder’s panel of 18 economists, academics, and property specialists unanimously forecast a rate hike today with half (50%) predicting a 50bp increase, 44% a 75bp increase and 6% just 25bps.
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