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The Atlantic seaboard market remains solid despite a dent in its armour
Category Property News
The Atlantic seaboard’s housing market has stoically withstood the brunt of the growing economic and political instability, consistently achieving double digit growth way above the national average.
However, in 2017 South Africa’s most resilient market finally began to yield to the pressure.
“Although the flailing economy slowly started to affect the top end of the market in 2016, steady demand and stock shortages continued to fuel the entry and mid-level markets,” say Lara Kaplan and Fran Segal, area specialists in Fresnaye and Bantry Bay for Lew Geffen Sotheby’s International Realty.
“This strong momentum continued into the following year and 2017 started off on a positive note. However, within a few months a discernible downward shift became apparent and we started to see a drop in sales and property price growth.”
The decline in the residential price growth rate on this prestigious strip is clearly reflected in the November FNB property barometer which reports a significant drop from a promising quarterly year-on-year high of 26.5% during the first quarter of 2017 to 23.88% by mid-year and 19.9% by the end of the third quarter.
Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, notes that the freehold sector experienced a sharper knock than the sectional title market, which he attributes to a number of key factors.
“While the security and convenience of apartment living have become increasingly appealing draw cards in recent years, a key factor now influencing both the housing and sectional title markets is the growing challenge of declining home affordability as consumers are forced to tighten already restrictive belts.
“This is borne out by the recent 12-month Lightstone reports ending 30 November 2017. In Fresnaye average house prices dropped by 1.76% during the last three months alone from a 12-month average of R15.21 million to R14.94m and apartments by 0.72% from R5,54m to R5.5m.
“In Bantry Bay, house values took a bigger knock, with the average sale price of R12.95m during the last quarter being 15.9% lower than the annual average of R15.47m. Apartments, on the other hand, fared well with the average sale price increasing from R6.47m to R8.54m.”
Geffen says that even the more accessibly priced suburbs have not been immune to the prevailing economy.
“In Sea Point, the average house price dipped by 7.89% during the last three months, from R7.29m to R6.72m and in Green Point by 3.26% from R7.29m to R7.05m.
“Only apartments priced under R3m reflected any growth between September and November. In Sea Point, the overall average sale price of existing units decreased by 7.6% but flats in the R1.5m to R5m bracket increased by 9.12%.
“The average sale price of apartments in Green Point rose by 3.9% between September and November from R4.04m to R4.28m and the average price of units in the R1.5m to R3m bracket grew by 4.4% from R2.23m to R2.42m with the only drop in average selling price being in the R3m plus bracket.”
Kaplan and Segal say that although the upper end of the market continued to be hardest hit by the prevailing climate, by the third quarter of 2017 a general nervous sentiment among the wealthy fuelled an increase in the number of luxury homes being put on the market in order to liquidate assets or move money off-shore. However, they expect to see a drop in reactive selling in this market after the positive outcome of the December ANC conference.
Kaplan and Segal add that last year they also noticed an increase in renovation as a growing number of owners opted to stay put rather than sell for a diminished return on investment.
Geffen concludes: “Although the Atlantic seaboard undeniably took a significant knock last year, it remains a stable market offering solid returns. Cautious optimism is further inspired by the fact that there is still keen developer interest in the area with undiminished demand for GR4 zoned plots and properties on which multiple units can be built.”
Author: Lew Geffen Sotheby's International Realty