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Monday Jun 30, 2014

Weak economy may hit property prices, banks warn

While some Cape Town estate agencies are reporting healthy growth in the city's housing market, from lower-end properties to the high-end market, banks have warned that economic weakness may start to push down year-on-year house price growth.

'Activity in the Cape property market is definitely buoyant, and at the best level in five to six years,' said Seeff chairman Samuel Seeff. But it needed to be noted that the bulk of the activity was in the under R2 million price sector, and for luxury housing up to R8m and R10m.

'Above R20m, more properties have sold, but the activity is much the same as it has been. Buyers are very selective,' he said.

Laurie Wener, managing director for Pam Golding Properties in the Cape metropole, said the market was in good shape.

'The signs of recovery which began emerging some two years ago have now become firmly entrenched and the property market in this region has embarked on an upward cycle,' she said.

'This activity was particularly evident in the apartment market on the Atlantic Seaboard and City Bowl, and in the more affordable housing market along the western seaboard,' she added.

Growth was evident in the sales of houses and apartments.

'Residential developments such as Legacy and The Odyssey in Green Point, as well as Belvedere Court in Claremont, sold quickly, demonstrating the demand for modern new apartments,' she said.

Sectional title properties in the southern suburbs were also popular for student accommodation.

'This market spans everything from basic entry-level properties for new-arrival students, to larger properties to be shared by final-year and postgraduate students,' Wener explained.

High- end developments at the V&A Waterfront had also been popular, said Basil Moraitis, the agency's Atlantic Seaboard and City Bowl head.

He said sales figures for last year showed that 69 apartments, valued at R447m, had been sold, more than double the number of units sold in each of the four previous years.

One reason for the rising demand might be the return of mortgage-dependent buyers to the market, said the agency, after a period where buyers had chiefly used cash.

Mike van Alphen, the national manager of Rawson Finance, pointed in a recent statement to some well-performing Cape Town suburbs, including Rondebosch and Brackenfell.

In Rondebsoch, he said, the price of freehold homes had risen every year since 2004, from an average of R1.34m to R2.9m.

In Brackenfell, which Van Alphen said was experiencing 'rapid and ongoing' development, the rise over the same period for freehold homes had been from R322 000 to R1.1m.

According to Paragon Lending Solutions, residential property has in the past few months overtaken commercial property as an investment opportunity.

'Surprisingly, residential property is proving to be a better investment choice than commercial property.

'This is due to the fact that the cost associated with owning residential property is less than commercial property,' said Gary Palmer, the company's chief executive.

But growth in the property market may start to slow.

FNB economist John Loos, while pointing to the 'solid performance' of the housing market nationally in recent times, warned earlier this month that year-on-year house price growth could start to flatten.

According to the latest FNB house price index, the average house price for last month rose to 8.1 percent year-on-year.

This was slightly higher than a revised 7.9 percent for April.

Loos said key economic numbers released last month had pointed to the economy being under pressure this year.

It was possible that the country had fallen into a mild recession.

Based on such economic weakness, said Loos, year-on-year house price growth was expected to slow this year, ending in the 5 percent to 6 percent range.

Weekend Argus (Saturday Edition)


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