CT Southern Suburbs property price growth

The Southern Suburbs property market is arguably the most dynamic in Cape Town, with more than 1 200 house sales last year earning owners in excess of R4.2 billion.

That’s according to Lew Geffen, Chairman of Lew Geffen Sotheby's International Realty, who says a seven-year analysis of the property market in the Southern Suburbs shows that between 2007 and 2014, average house prices in the area have increased by 18% from R2.7 million to R3.19m.

“Overall across the Southern Suburbs, Atlantic Seaboard and City Bowl, freehold title sales levels have improved dramatically since the global economic crash that started in 2008. At that stage the freehold market in in those areas was worth just over R6bn, which improved by 48% to R8.886bn by the end of 2013.

“Much of that market movement was in the Southern Suburbs, which have always represented the most desirable picture of suburbia imaginable; quaint cottages or large homes on leafy streets radiating a sense of history that you’d be hard pressed to find anywhere else in South Africa.

“If Cape Town’s Atlantic Seaboard could be compared to a Ferrari,” says Geffen, “the Southern Suburbs would undoubtedly be a Bentley or a Rolls Royce.”

Claude McKirby, Co-Principal of Lew Geffen Sotheby's International Realty in the Southern Suburbs, says buoyant demand for houses in all suburbs resulted in 2013 being the best year since 2007 when the property market peaked in terms of volume.

“During 2013 a total of 1 575 houses were sold to the value of R5.024bn, with an average property value of R3.19m.

“South African Deeds Office sales figures for the first nine months of 2014 indicate that 1 211 houses in the Southern Suburbs were sold to the value of R4.24bn. This total will increase as the property transfer information for the final quarter of the year is made available by the Deeds Office.”

According to McKirby, available freehold transfer information for 2014 indicates the most active price band for house sales was between R2.5m and R5m. Some 395 sales were recorded in this price range to the value of R1.328bn, followed by the price band of R5m to R10m, in which 162 houses worth R1.062bn were sold.

“Obviously when one looks at the top tier areas such as Bishopscourt and Constantia Upper prices can exceed the R20m mark. These suburbs are arguably the most exclusive in Cape Town and properties there are highly desirable,” he says.

“According to available data last year there were 11 sales in the R20m and above bracket, with the highest single sale recorded in Canterbury Drive in Bishopscourt, which was for R69m.

“In fact Bishopscourt led the pack all the way in this price bracket, with just six sales garnering owners a total of R189.5m. Constantia Upper was next in line with three sales worth R63.5m and Upper Claremont next with two sales worth R48m.”

McKirby says the average Rand value per individual sale this price band is between R21m and R24m.

Arnold Maritz, McKirby’s Co-Principal in the Southern Suburbs, says five suburbs stood out in 2014 in terms of recording the highest Rand value in overall sales.

“These are sales recorded across all price ranges, but the Rand value of the properties sold is an excellent indication of the desirability of these suburbs for prospective buyers,” says Maritz. “If there is a high turnover of property, it means that there is a substantial appetite for houses in those areas.”

He says according to available data the suburb that the garnered the highest value of sales last year was Constantia at R1.37bn (229 sales), followed by Claremont at R592 million (166 sales), Bishopscourt at R397 million (only 24 sales), Rondebosch at R330 million (99 sales) and Newlands at R295 million (63 sales).

“But perhaps the most important thing for people who are buying property to consider is the long term return on investment. The old adage is that one should buy the worst property in the best area that you can afford, and that does hold true to a large extent.

“South Africa has a rapidly expanding middle class, though, and a substantial shortage of housing stock to accommodate them, so it’s wise to do your homework before buying any house,” says Maritz.

“If you have the money it might serve you better in the long term to invest in two lower-priced properties a suburb that is showing an extremely high return on capital investment over a period of seven to 10 years, rather than one in another suburb that is far more expensive with lower appreciation.”

Maritz says this option also presents the opportunity to earn rental income on one investment while living in the other.

“Return on investment, also known as % ROI over a period of time is not a fixed rate per suburb. It all depends on the state of your property when marketed. All-round well-maintained properties sell faster, achieving higher prices than others that needs extensive renovations and upgrading of perhaps kitchens and bathrooms.”

“To use Tokai as an example, a sample of 20 properties sold last year showed a nominal capital ROI of between 8% and 22% per year over seven years.

“While around 8% is the median for the area, a ceiling return of as high as 22% can be achieved if a property is, for instance, substantially renovated and modernised during that period. Exceptional properties will attract higher prices.”

Geffen says while the largest percentage of the Southern Suburbs property market remains Capetonian buyers, purchasers from Gauteng and abroad are increasingly investing in the higher end of the market - particularly the security estates.

“According to our specialist agents in the area last year alone there was a more than 15% increase in unit prices of completed houses sold on security estates such as Stonehurst Mountain Estate.

“In the past year buyers on these estates have included numerous South Africans returning from living abroad, as well as ‘commuter families’ from Gauteng and citizens of the UK, the US, Portugal, Brazil, Russia, Switzerland, Nigeria, Ghana and India.”

Geffen says entry-level prices in most parts of the Southern Suburbs are now above the R2m mark.

“The time to invest is now, especially if you’re trying to get your foot on the property ladder. By this time next year you’ll be able to add at least R300 000 - if not more - to the price of any house you’re thinking of buying at the moment.

“House prices will not be going down in the medium term and interest rates are likely to go up, so property will never be more affordable than right now,” Geffen says.

• Property24 9 March 2015