Cape Town – Luxury lifestyle estates are increasingly benefiting from a growing number of buyers moving up into the higher-value markets.
Estimates reflect around 318 000 residential properties within secure gated communities, with a combined value of R643bn at an average of R2m per property. This is almost three times more than the national average of R700 000 per home.
Fifty percent of these are in Gauteng and 25% in the Western Cape.
This is according to the first Lightstone Overview of the Property Industry presented at Pearl Valley Golf & Country Estate outside Paarl on Thursday. Lightstone is a property-specialised risk management company.
The research found that about 5.2% of the residential properties in South Africa are situated in estates (15% in terms of total value).
"We found security estates to be a good idea in a country with a lot of crime, but other factors also play a part in its success," explained Paul-Roux de Kock, analytics director for Lightstone.
"Road access to an estate, access to schools and business centres also play a huge part."
De Kock said the research also shows what he describes as "the two economies" economies in the SA residential property market with more than half of properties valued at R500 000 and lower and about 44% valued at R1.5m upwards.
Forecasting in 2014 a year-on-year house price inflation figure of 6.7%, Lightstone reported an actual price growth rate of 6.72%, with a steady performance in the higher-end markets throughout last year.
The value of price growth was its highest since the 2008 subprime mortgage crisis, with low-value price growth leading the pack by just under 30%, followed by mid-value, high and luxury.
The ongoing demand for more formal housing throughout South Africa has driven the strong price growth in the lower to middle segment markets.
“Growing demand in the lower-value markets has a longer term positive impact on the high-end categories. South Africans want to grow, to increase their net worth, and ultimately to afford that dream home that offers all the benefits associated with success," said De Kock.
Sales of Pearl Valley’s newly released developer erven is mirroring this trend, with a growing demand among younger buyers for freehold stands. For the period March 2014 to February 2015, more than 51% of buyers fell into the 36 to 49-year-old category, compared to 31% in the 50 to 64-year-old category.
High road scenario
Although price growth forecasts are pegged at 7.2% for 2015 for a potential high road scenario where gross domestic product (GDP) grows more than expected, a demand for security in the face of deteriorating crime statistics, and aggravating factors such as labour unrest, will pose the biggest threat yet to the property market.
These reduce the purchasing power of buyers and bank risk appetite in the low and mid-value markets. Lightstone, therefore, forecasts a more realistic residential price growth of around 5.8% for 2015.
De Kock says he is “cautiously optimistic” about what this year holds for the South African property market and he sees banks as being cautious to prevent a bubble from forming.
“South Africa’s challenges are complex and require a cohesive approach and solution, given that one has a direct impact on another. That said, the market is positive and banking activity reflects that,” he explained.
"Banks are now reaping the benefits of the good risk practices implemented a few years ago and I think lots of banks are especially interested in how to enter the lower value market in a responsible manner."
In the higher-value markets, around 60% of property transactions are bonded, with over 85% of bonds granted being for primary loans as opposed to further advances or switches. Average mortgage-lender loan-to-value of primary bonds range from 82% to 93%, depending on the bank, with deposits of between 7% and 18% required.
According to Jason Rohde, CEO of Geffen International REalty Franchises, the residential property market in the Western Cape is very buoyant, with an influx of "people from up north of the country" moving down to the province.
In his view this trend is mostly due to the quality of lifestyle and good infrastructure in the Western Cape.
The result of the influx is pushing property prices up in his view and in sought-after areas there is a greater demand than supply of stock.
The lack of stock in the Western Cape is due to three reasons in his view. These are the increasing building costs, the cost of moving and developers still not as active as in the past.
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