Cape Town - Signs of a broad slowing in house price growth in the City of Cape Town are emerging, according to John Loos, household and property sector strategist at FNB.
He emphasised, that although affordability is becoming a challenge, slowing growth does not mean price decline.
"Our most recent FNB Estate Agent Surveys have recorded far lower first time home buyer estimates in Cape Town than any other of the major metros in the country", Loos told Fin24.
"This leads me to believe that it is time for Cape Town’s market to cool off as the purchasing power is becoming insufficient to support the recently strong house price growth."
The FNB Major Metro House Price Indices, show the slowest ones in the second quarter of 2017 have been Nelson Mandela Bay with a -2.7% year-on-year decline, and Ethekwini with a 2.8% rise.
"At the top end of the growth scale, the City of Cape Town’s 7.9% year-on-year rate continues to outperform, but has seen slowing growth in recent quarters," said Loos.
Cape Town’s property market remains resilient, showing pockets of positive activity in a national environment characterised generally by weakened economic growth, according to Richard Day, Pam Golding Properties' national general manager and Cape Regional managing director.
According to Lightstone data, Cape Town’s year-on-year house price growth was 13.4% in early 2017.
Pam Golding Properties’ results for the first quarter indicate positive sales activity in several Cape Metro suburbs including the Atlantic Seaboard, Blouberg, Camps Bay, City Bowl, Hout Bay, Newlands and the South-Eastern Suburbs.
According to the FNB Property Barometer's House Price Index for May 2017, the Atlantic Seaboard showed the strongest house price growth in the first quarter, with an estimated year-on-year house price growth of 33.9%.
This market has become increasingly price sensitive with buyers taking longer to commit, says Basil Moraitis, Pam Golding Properties' area manager for the Atlantic Seaboard.
Top sales during the first quarter of 2017 include R30m for Glen Beach, Camps Bay, and a plot of vacant land in Bantry Bay that sold for R25m.
The City Bowl followed closely with a 20.9% house price growth in the first quarter of the year, given the development boom and strong demand for city living.
The Southern Suburbs also reported a good run on sales for the first quarter, especially in Bishopscourt, Upper Constantia and Rondebosch with a record sale in this area of R15.5m for a Sandown Road property.
Semigration remains a key catalyst in house price inflation in the Western Cape and Pam Golding Properties (PGP) continues to see people opting to first move to Cape Town or to secure estates around the country before considering other alternatives, including emigration, says Day.
This is reflected by the large percentage of sales linked to the desire to downsize (29% of sales according to FNB figures), says PGP research analyst, Sandra Gordon.
Many Gauteng buyers are drawn especially to the Overberg and Boland areas, looking for a country lifestyle that is still relatively close to Cape Town. Agents say many of the Gauteng sales are to buyers wanting a second residence, with the intention to settle in the Cape in the long term.
Samuel Seeff, chair of the Seeff Property Group, says it comes as no surprise that the Cape property market is showing stronger resilience given that it has a number of factors that counts in its favour.
Excellent governance in the city; a superb value proposition, with the location between the mountain(s) and the sea; and the lifestyle are some of the strong draw-cards, in his view.
Other factors include international tourism acclaim, which attracts people from across the globe; super capital value growth, especially in the high demand areas such as the Atlantic Seaboard and City Bowl and, the large net inflow of people looking to relocate to the Cape from across the country.
"The market benefits from a much wider demand base. Firstly, local buyers are still showing strong confidence, then, there is the strong inward migration that has escalated since 2010 - the last census, for example, showed about a 30% increase in residents," said Seeff.
"On top of that, there is a growing demand from an already strong foreign buyer base, now extended well beyond the traditional UK and European source markets to include the Middle and Far East as well as buyers from sub-Saharan Africa."
Development with vision
In Seeff's view, a lot of the growing acclaim and demand for property in Cape Town must also be attributed to what he calls "the fabulous development by people with vision", which started with the redevelopment of the CBD and V&A Waterfront, followed by De Waterkant, Green Point, Sea Point, the rest of the Atlantic Seaboard suburbs and now onto the downtown and Foreshore area.
The new Silo precinct, for example, is a fabulous new addition to the city, in his view, and the Yacht Club and other development plans will add further desirability.
Seeff points out that the Cape is also a superb holiday destination and very sought-after for second homes, with the wealthy from Johannesburg and Pretoria prepared to pay well into the upper millions for a property on the Atlantic Seaboard.
"Despite a weaker economic outlook, development is still ongoing and there seems to be excellent demand for developments," said Seeff.
"South Africans are prepared to pay more for property in the Cape compared to Joburg and Pretoria."
As an example, in Sandton only about ten properties sold above the R20m price band last year. On Cape Town’s Atlantic Seaboard, from January to March, there were already more than about 20 such sales, reaching a high of R72m in Fresnaye.
"On the whole, the Cape market remains very well balanced, but it is slower, stock volumes are increasing, properties are taking longer to sell and prices are under pressure. Sellers need to be mindful of this," said Seeff.
"There are pockets of excellence where there is still demand, regardless of the prices, but this is very area or estate specific.
Seeff has had a number of record or high value sales so far this year. These include a sale of R32m in Hout Bay, R34m in Higgovale, a few high priced sales in Camps Bay, along with excellent sales in, among others, Fresnaye, the Waterfront, Mouille Point and Constantia Upper.Read Fin24's top stories trending on Twitter: Fin24’s top stories