Investing in the Winelands

The Cape Winelands, once favored only by wealthy retirees, has become a hotbed of market activity recently, attracting a broad range of buyers. Sales are buoyed in this region despite the slow market in the rest of the country. According to recent data from Lightstone Property, 76 houses in the R3m plus bracket were sold in Stellenbosch over the 12 month period ending July 31, with an average sale price of R6.1m. Of these, 19 sales took place in the past three months at an average price of R6.9m. The average sale price of estate homes in this price band also rose from R6.9m to R7m during that time, and in Paarl the average price of an estate home rose by 23% from R4.8m to R5.9m between May and July.

RECORD HIGH

"Even though sales volumes have dipped since 2016, the median price of houses in the Winelands region remained consistent at R1.96m in 2017, dipping a little in 2018 but rising again this year to a record high of 2.1m, a healthy increase of 9.6%," says Chris Cilliers, CEO and principal of Lew Geffen Sotheby's International Realty in the Winelands. AfrAsia Bank's SA Wealth Report for 2019 underscores the Lightstone data, indicating that growth in the wealth markets of Johannesburg and Cape Town has been "fairly muted compared with new areas such as the Whale Coast and the Paarl, Franschhoek and Stellenbosch districts, which saw growth of 22% and 21% respectively over the past 10 years". The lure of the Winelands region is its peaceful country lifestyle, proximity to the city and Cape Town International Airport, and a number of excellent schools in the area. Cilliers says getting away from the stressors of urban life has been a trend for a number of years now, especially among families with young children. "People are looking to escape the growing traffic congestion, crime and general pace of city life. We've also been fielding more enquiries from professionals who predominantly work remotely or from home, and from empty nesters looking to ease more gently into their golden years," he says. The upmarket sector in the Winelands is attracting significant interest from both local and foreign investors, with considerable interest from international clients who want to buy second homes or settle in SA permanently. Estates in the Helderberg area in Somerset West, closest to Cape Town, are where the upward trend in the Winelands first becomes noticeable. "We are experiencing tremendous demand for homes in the R2.4m to R3m bracket at Acorn Creek Lifestyle Estate. And the apartments, from R1.25m, are equally sought after," says Werner Scheffer, project manager for Multi Spectrum Property. The Huntsman, a new Balwin Properties development in Somerset West with apartments A country lifestyle, top schools and proximity to the city, beach and Cape Town International Airport make the Winelands a residential favorite among a wide range of buyers starting at R850,000, is finding a strong market among young professionals and first time buyers, according to principal sales agent Kerry Krynauw. At Val de Vie Estate near Paarl there has been a slowdown of Gauteng semigration and an upswing of buyers from Cape Town looking to move to the countryside, according to group marketing director Ryk Neethling. "The decline in Gauteng buyers is partly because clients are struggling to sell their properties in Gauteng. But we've seen a definite increase in buyers from Cape Town's Southern Suburbs and also from KwaZulu Natal," he says. De Zalze Winelands Golf Estate and Brandwacht aan Rivier, both in Stellenbosch, and Boschenmeer in Paarl are maintaining robust sales too. "The established lifestyle estates perform consistently well. De Zalze and Brandwacht aan Rivier are doing particularly so," confirms Louise Varga, Pam Golding Properties area manager for Somerset West, Stellenbosch and Strand. Similary, Igrow Wealth Investments, which is marketing L:Ermitage Franschhoek Chateau & Villas in Franschhoek, is enjoying good sales of its recently launched second phase of 18 two bedroom villas priced between R3.2m and R4m. "Ten of the units are already reserved, mostly by cash buying investors, a number of whom are South Africans working and living abroad," says Lezelle Kirsten, Igrow project co-ordinator for new developments. Grootparys Estate in Paarl has also launched a successful new phase of development. "We have sold 40% of Phase 1 and are constructing another 17 homes. Interest is definitely picking up, says principal sales agent Reon van der Merwe.

RESALES PEAK

The current buyer's market is being boosted by the increased number of resales of homes in some of these Winelands estates. "There has been a noticeable peak in resales over the past two months, largely because of sellers leaving the country," says And Wilsch, sales agent for Nooitgedacht Village in Stellenbosch, where properties are selling for between R1.8m and R3m. According to Chris Cilliers, serious sellers who have had their properties on the market for several months are now making peace with the fact that this is a buyers' market and are accepting offers they may have turned down a few months ago. The most sought after properties for cash buyers, Cilliers says, are estate homes in Paarl, premium new builds in Somerset West and houses in the more exclusive suburbs of Stellenbosch. Estate agents working in these areas concur. "We are definitely experiencing a buyer's market linked to prevailing economic and political concerns and tighter budgets," says Lanis Salmon, who markets Somerset Lakes, Spanish Farm Estate, Lane's End and The Den. "At this stage, buyers are staying away from Stellenbosch properties set at high prices. The cheaper homes we get, on the other hand, sell very quickly," says Seeff sales agent Wessel Goosen. However, at the upper end, in the R8m plus bracket, demand hasn't waned among astute investors recognizing the opportunities to exploit a weaker market. "The interest in homes over R15m and Gentleman's Estate stands is still very strong," says Neethling of Grootparys Estate in Paarl Acorn Creek Lifestyle Estate in Helderberg, Somerset West this exclusive Val de Vie offering. "We recently sold three Gentleman's Estate properties for an average price of R18m per stand."

RENTAL RETURNS

Although lifestyle estates in the Winelands remain in much higher demand than ordinary neighborhoods because of their improved level of security and lifestyle amenities, the return on investment has adjusted in line with the price correction on the back of a very strong climb, says Claudius Combrinck, executive director of property sales at Sitari Country Estate in Somerset West. Property prices at Sitari range from just over Rim to R5m. "Earlier in the Sitari scheme we saw some quick high growth returns but buyers can expect a more sensible return of between 6% and 8% over the longer term," he says. Cilliers puts the figure slightly lower for Winelands homes in general, at between 5% and 6%. "The value in this region remains in the capital growth over the long term," he says. When it comes to properties in well-established upmarket estates that are close to major travel routes, however, the return on investment is significantly higher for those who entered the market early. For example, an erf in De Zalze that cost R1.5m in 2004 was sold with a house built on it for R8.5m six years later and is currently being marketed by Pam Golding for R17.5m. Investors in the Winelands are particularly drawn to new properties where no transfer fees are payable, because such deals offer the potential to achieve maximum returns as a result of lower acquisition costs. "These buyers range from individuals padding their portfolio with rental income to those choosing to secure a retirement property at today's prices and letting it until it's needed," says Salmon. She adds that new apartments in Somerset Lakes Estate, selling from R850,000, have just been launched to meet the need of such investors. "Studio and two bedroom properties are popular because they're much easier to find tenants for. The rental return is about 7% currently, but we're expecting it to increase in a couple of months, as the banks remain sticky about lending, yet the motivation to get onto the property ladder is still there, especially among millennials," Salmon says. Ultimately, the appeal of the Winelands lies in the desire to have it all security, convenience and a tranquil lifestyle in picturesque surroundings. The fact that making it yours has become more affordable is the fuel that will boost sales well into the future.