In small towns across SA, from the once-sleepy Paternoster and Parys to pretentious Plett, housing sales records were shattered this year. Industry players call it the "zoom boom" — a relocation spree fuelled by pandemic-related remote working, allowing city-dwellers to trade their frenetic urban lifestyles for more tranquil surrounds.
Latest property sales data underscores the extent of the trek to the coast and countryside. The scenic Garden Route and its smaller towns and coastal villages, many of which have historically been considered holiday or retirement destinations, appear to have been major beneficiaries of the work-from-anywhere trend.
Research by property and data group Lightstone reveals that George, at the foot of the Outeniqua Mountains, ranks as SA’s most popular semigration town (excluding urban areas) for 2021. That’s based on the number of new residents moving to the town from elsewhere this year.
In addition, the nearby seaside enclave of Plettenberg Bay, known for its beautiful beaches, mountain vistas, paddocks and pastures, has trumped Cape Town’s upmarket Atlantic seaboard in the big-ticket stakes. This year, it is Plett — and not the usual suspects of Clifton, Camps Bay and Fresnaye — that accounts for the highest sales prices achieved in SA, by two of the country’s largest residential real estate players: Seeff Property Group and Lew Geffen Sotheby’s International Realty (LGSIR).
Seeff’s top-end sale, a spacious beach home tucked away on prestigious Beachy Head Drive, with spectacular views over Robberg Beach, was sold twice this year. And both sales set a record price for the town. In May, the house was sold to an SA expat at the full asking price of R55m within a week of listing; in August, a local businessman bought it for R60m.
Plett’s previous high — R50m — was achieved back in 2006.
Last year, prices topped out at R44m (for a home in gated estate Whale Rock Beach).
Seeff’s second-highest price in the year to date came in at R52m, for an eight-bedroom Camps Bay villa on Theresa Avenue, on the slopes of the Table Mountain Nature Reserve. The sale, knocked down from R65m, was made to an SA expat who lives in the UK.
The priciest (single-dwelling) property sold by LGSIR this year is also in Plett: a fancy pad perched above Lookout Beach changed hands at R38.35m. It was bought as a holiday home for a British family.
LGSIR also clinched two other sales above the R30m mark in Plett this year.
Steve Neufeld, manager principal for the property group in Plett, says sales volumes in the area have reached record highs this year. That’s pushed the average year-on-year price in the town up by a whopping 38% from January to September, to R3.4m. That comes on top of the average 9% increase recorded last year.
Neufeld believes key drivers have been a surge in semigration on the back of remote working, as well as a general uptick in confidence among top-end buyers.
Seeff group chair Samuel Seeff says Plett’s resurgence as a destination of choice among the well-heeled points to a Covid-induced shift in buyer priorities. Around the world, prospective property buyers have been looking for a better work/life balance.
Plett, says Seeff, ticks many boxes for those considering relocating or purchasing a holiday home. It has a small-town vibe, with safe and easy-going outdoor lifestyle options, and it offers strong capital growth prospects, as buyers are prepared to pay a premium for properties in prime locations. The lockdown-related "race for space", which has boosted demand for larger and better-equipped properties, has no doubt further supported Plett’s rebound. Buyers typically get more bang for their buck here — in square metreage terms, at least — than on Cape Town’s Atlantic seaboard.
Shifting priorities
The pandemic has not only upended buying behaviour among the wealthy. It’s prompted people in all income brackets to reassess where and how they live, driving a wave of activity in the housing market across SA.
Seeff tells the FM that 2021 has been the best overall sales year in his group’s 57-year history.
While there has been a noticeable recovery in appetite for top-end, R30m-R60m trophy homes, especially on the Garden Route and Atlantic seaboard, 86% of housing transactions in SA are still below R1.5m.
Last year’s aggressive interest rate cuts to near 50-year lows provided a particularly strong incentive for first-time buyers to swap renting for owning. It also made it more affordable for existing homeowners to relocate or upgrade.
In addition, fierce competition for a bigger slice of SA’s R1.1-trillion home-loan market has translated into more lenient lending criteria and better pricing from the big banks.
Rhys Dyer, CEO of mortgage originator ooba, points out that the average deposit required by banks for ooba-approved home-loan applicants declined by 10.5% year on year in the third quarter — from an average R111,965 to R106,015. Moreover, the average interest rate secured for ooba clients dropped to 0.14% below prime — 23 basis points (BPS) lower than the average of prime plus 0.09% recorded a year earlier.
Nevertheless, most industry players have been surprised by the length and strength of the housing rebound. As Re/Max Southern Africa director Adrian Goslett puts it: "Understandably, the third quarter of 2020 was a period of unprecedented activity, as record-low interest rates and pent-up demand following the deeds office closure drove sales to a record high. But what we didn’t expect was that this period of hyperactivity would last as long as it has. It is now a full year later and we are still seeing record-breaking sales volumes."
You’d have thought that last year’s buyer exuberance would wear off this year, says FNB economist Siphamandla Mkhwanazi. But the housing market has been "unusually slow" to react to the severe job losses of the past 18 months and a still-stuttering economy. One likely explanation is a shift from first-time to repeat buying, he says.
According to Mkhwanazi, the first wave of buying last year was driven primarily by first-time buyers, switching from renting to owning, and mostly in lower price brackets (R750,000-R2m). This year the action has shifted to higher price brackets — reflected in a demand for bigger home loans.
So while first-time buying has cooled off, Mkhwanazi reckons the second wave has been supported by older buyers with stronger balance sheets, many of whom may also have seen a recovery in stock market returns and are upgrading to larger properties, semigrating to other regions or buying second homes.
As a result, Mkhwanazi has significantly upgraded his house price growth forecasts. In January he predicted that average house prices would drop by 2.2% this year. He now expects growth of 3.8% for 2021 as a whole, comfortably ahead of last year’s 2.5% average.
Latest figures from Lightstone confirm the renewed buoyancy in the housing market. Interestingly, following something of a slowdown in the first two quarters, the total value of all residential property sales recorded in the deeds office reached a 12-year high in the third quarter, when properties worth R91.85bn changed hands. That surpasses last year’s fourth-quarter peak (R86.32bn). It’s also six times the record low of R15bn in the second quarter of last year, when housing sales came to a virtual standstill during the hard lockdown.
More telling is that the latest quarterly sales turnover figures are comfortably ahead of 2019’s pre-Covid highs, of about R64bn.
The number of sales has also picked up steadily this year, from 75,918 transactions in the first quarter to 86,623 in the third — just slightly behind last year’s fourth-quarter peak of 92,821, but ahead of 2019’s third-quarter high of 85,506.
Another interesting set of data that reflects just how Covid-proof the housing market has turned out to be is average "time on the market" — the number of days it takes to sell a house.
Marcél du Toit, CEO of fixed-fee estate agency Leadhome, says the average number of days it took the group to sell a property in 2020 vs the year to date dropped from 121 to 86 in Joburg, and 105 to 77 in Cape Town. The decrease was especially pronounced in Pretoria, where it now takes only 44 days on average to sell a home, against last year’s 131. In Durban, time on the market is down from 119 to 49 days.
The end of the run?
The key question is: has the housing recovery run its course, or is there further upside to be had in 2022?
Mkhwanazi, for one, expects something of a slowdown over the coming months, as the reality sets in of last month’s 25 BP hike, taking the prime interest rate to 7.25% (with the possibility of more hikes ahead next year) and constrained labour. Other headwinds include Eskom’s ongoing load-shedding, the slow pace of SA’s vaccination programme and uncertainty around the impact of the Omicron variant on the global economic recovery.
As a result, Mkhwanazi expects average house price growth to slow marginally to 3.2% in 2022.
Pam Golding Property Group CEO Andrew Golding agrees that overall activity levels and price growth are likely to drift slightly lower over the next 12 months. However, he believes there will still be pockets of strength, driven by particular trends.
For one, Golding believes the return to the office — albeit gradual and, for some, only two or three days a week — will make many people reassess the practicality of living far away from their place of work. He expects the zoom boom to start fading next year, as people begin to return to city living. "It’s also important to bear in mind that SA has a young population, many of whom are likely to prefer the buzz of a city hub to the quiet life in the country," he adds.
Golding expects strong demand in urban areas that offer residents a true mixed-use live, work and play lifestyle — the "15-minute neighbourhoods", where residents can walk to work, as well as to bars, clubs, coffee shops, restaurants and other leisure amenities. Golding cites the Cape Town and Sandton CBDs as prime examples.
The bid to save on overhead costs, especially for those who will only partly return to the office, will also support the continued merging of residential and commercial units into single buildings that offer a mix of offices, co-working spaces, retail outlets, gyms and residential (or aparthotel) units.
LGSIR CEO Yael Geffen believes there’s still plenty of pent-up demand at the higher end of the market, which only recently entered an upswing. She expects the pandemic-induced search for a change in lifestyle and better living conditions, especially in middle and higher price brackets, to remain a major trend in 2022. This, says Geffen, will drive continued demand for property in secure lifestyle estates that offer extended on-site leisure amenities.
"Semigration to rural towns and coastal areas will also continue ... and housing markets in towns like Plett will continue to thrive," she says.
It’s a sentiment shared by BetterBond CEO Carl Coetzee. He says buyers at the upper end of the housing market have only recently started to make the most of lower interest rates. He refers to BetterBond’s latest figures, which show the number of applications for home loans of R3m-plus jumped by almost 48% year on year in October. That helped push overall application volumes up 16.6% for the month, year on year.
Coetzee believes the R3m-plus segment of the market still has a way to go before it runs out of steam. "We know that interest rates have to normalise as our economic activity returns to pre-pandemic levels, and inflation starts to rise," he says. "But we expect this to be a gradual increase, with the prime lending rate sitting comfortably below double digits for a while yet."
Besides, Coetzee says, rate hikes notwithstanding, it’s still way cheaper to buy property than it was in January last year, when prime was at 10%. In rands and cents terms, a R1m bond will cost you roughly R1,750 a month less than it did then (at prime, over a 20-year loan term). Of course, the monthly savings are even more significant at the higher end — R5,540 on a R3m loan, and a hefty R11,380 on a R6m loan.
It seems industry players’ bet on the continued buoyancy of the luxury market has already led to a resurgence of super-wealthy property owners testing the market with cheeky price tags.
A number of sales, for example, are being marketed in the R100m-plus bracket.
Among them is a three-storey Sandhurst "super-home" — designed by Pellerade Design House on a "no-expense spared" basis. It’s up for grabs for a cool R150m.
Or, if Clifton is more your bag, Dogon Group Properties is marketing a 1,124m² vacant plot at the end of Nettleton Road (arguably the most expensive street in Africa) that "embraces iconic postcard" views of ocean and mountain. It’s going for a staggering R175m (non-negotiable, nogal).
Any takers?
The number of days it takes to sell a house has fallen dramatically in Joburg, Pretoria, Cape Town and Durban
— What it means:
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