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Friday Jan 22, 2016

Cape holds its own in slow property market

The Western Cape's residential property market is holding its own despite reports of growth nationwide being slowed by inflation, say property experts.

Nedbank economist Busisiwe Radebe said mortgages accounted for about 40 percent of credit extended nationally, although the growth in the number of home loans taken during the second half of last year had been low. "Not a lot of people are taking out loans.”

Radebe said mortgage growth had been negatively affected by stricter lending criteria by financial institutions, lower consumer confidence due to unemployment, higher interest rates and the expectation that inflation will further erode incomes.

She said house price inflation would be limited as a result. "If there are fewer people wanting mortgage loans there might be more stock of properties for sale which could limit increases in house prices. There will be a lot of stock and less people to buy."

Radebe said Nedbank believes that interest rates are going to increase by 125 basis points in total this year.

However, Mike Greeff, chief executive of Greeff Properties/Christie's International Real Estates, said the province's real estate would probably weather the downturn in the housing market.

"It's important to take note of the fact that the Western Cape has historically out-performed the national average, which points to a higher level of property owner and would-be investor confidence."

Greeff said continued high demand in all areas of the peninsula would probably result in prices holding their own. He said prices for secure properties in gated estates and apartment blocks with 24-hour manned security were the least likely to fall.

Greeff added that increased interest from foreigners due to the weakened rand was another factor that could buoy prices.

"Buyers from Gauteng and other provinces continue to 'semigrate' to the (Western) Cape, and this too maintains a high level of demand." However, Greeff also noted that "the growth in average selling prices is starting to flatten out, influenced by rising inflation on food, fuel and services and an inevitable interest rate hike in 2016".

Lew Geffen, chairman of Lew Geffen Sotheby's International Realty, said that after the 2008 global crash, South Africa's residential property market had fallen by between 25 and 30 percent.

He said the Gauteng market would remain active and would grow over the next year, but the biggest demand was likely to remain in the Western Cape.

"The perception is that there is a better quality of life and delivery of basic services in the (Western) Cape, and that it is safer."

Geffen added that the firm's Atlantic Seaboard office achieved a record turnover last month, not so much fuelled by international buyers but by South African investors. "The massively devalued currency and the lifestyle will also increasingly attract foreign buyers, but we're likely to see simultaneous increases in protests and unrest this year as more poor people are excluded from the economy, fuelled by the drought and other factors."

Laurie Wener, managing director of Pam Golding Properties Western Cape, said that while the South African residential housing market was being buffeted by economic headwinds, the Western Cape remained the top regional performer, supported by steady in-migration from other provinces, mainly Gauteng and KwaZulu-Natal.

"The Western Cape is still experiencing a sellers' market driven by buyers from all over South Africa and Africa buying property in which to live permanently, temporarily or for investment. They also seek student accommodation for their children, with the secondary purposes of holiday accommodation and investment."

She said the Atlantic Seaboard is considered the recession-proof jewel in the crown of African property. "While there is a demand for these top-end properties, sales are limited in some cases by sellers who increase prices in response to the depreciating rand."

Samuel Seeff, chairman of Seeff properties, said the property market remained steady. "Part of the reason is that... stock levels are tight and there is no oversupply in the primary housing sector and we do not have to contest with the volume of distressed properties that hampered sales and price growth immediately after 2007/8."

Cape Argus

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