Five areas outperformed the overall average house price growth seen across the metro over the past five years:
- The Atlantic Seaboard (from Green Point to Hout Bay),
- City Bowl,
- The eastern suburbs near the city (areas such as Woodstock, Salt River and Pinelands),
- The Southern Suburbs (extending from Rondebosch to Muizenburg), and
- Southern Peninsula (including Simon’s Town, Fish Hoek, Noordhoek).
Overall price inflation in the metro is almost exactly double the national House Price Index published monthly by the bank over the five year period. Another way of looking at this is that other areas (smaller provinces, as well as mining and holiday towns, for example) have lagged dramatically, given that this data is all rolled up into the single figure.
In Cape Town, even recent laggards such as Somerset West/Strand and Atlantis have outperformed the index (and inflation) by 10 percentage points since 2012.
With inflation (CPI, as per Statistics South Africa) for the five-year period at a quarter of a percentage point under FNB’s House Price Index, in real terms, average house prices in South Africa have been flat. Let me repeat that: average house prices in South Africa have gone nowhere since 2012.
Of course, because this is a national average, it will not apply to every size and type of home in every possible area in the country. Loos’s detailed research shows the divergent performances of sectional title vs full title house prices (the former has marginally outperformed the latter), with smaller homes (especially in sectional title schemes) outperforming larger ones.
Property prices in major metros have tended to outperform other cities and towns and those in former township areas in the metros have generally outstripped price growth in the broader metros.
However, the Western Cape and especially Cape Town has “significantly outperformed” the rest of the country, says Loos. The trend of ‘semigration’ to the Cape from (especially) Gauteng has certainly helped drive this demand. Brenthurst’s Magnus Heystek, among other commentators, has long been pointing this out (Emigrating or semigrating, from March 2015).
A separate report from Loos (Inter-Provincial Repeat Home Buyer Migration Trends) found that 56.2% of outbound repeat home buyers from Gauteng headed to the Western Cape last year. There is a similar trend in outflow from the Eastern Cape. The methodology is actually dead simple: Loos calculates what percentage of (and in what direction) repeat buying (i.e. the selling and then purchase by the same individual) is in a different province.
He says the “net inflow of repeat buyers to the Western Cape has been nothing short of spectacular, measuring a staggering 17.4% of the provinces total repeat buying, having accelerated steadily since 2009, and even more sharply from 2015’s 10.6% of repeat buying”.
He adds that “the further acceleration in net inflow repeat home buyers in 2016 explains much of the Western Cape’s far superior house price growth in 2016”. With this trend firmly in place, the rampant house price inflation in the five areas that have outperformed the broader metro is easily explained.
|City near eastern suburbs (incl. Woodstock, Salt River, Pinelands)
|Cape Town Metro overall
|Elsies River-Delft-Blue Downs
|Bellville, Parow and surrounds
|Somerset West-Strand-Gordon’s Bay
|FNB House Price Index
Sources: CT metro prices: FNB City of Cape Town House Price Indices; Overall FNB house price index: author’s calculations from FNB data; CPI: author’s calculations from StatsSA data.
Over a longer period, since 2001 when the FNB House Price Index started, two regions – Atlantis and those surrounding the University of Western Cape and Cape Peninsula University of Technology (to the north and east of the airport) – outperformed all but the City Bowl and Atlantic Seaboard.
In recent years, the commuter region of Bloubergstrand/Milnerton/Melkbosstrand is cited by Loos as one that has become more popular, perhaps because of the fact that it is “more affordable (or less in-affordable)”. But even here, year-on-year house price inflation in Q4 2016 was still 12.5%.
Loos does believe that a “little over-exuberance” has probably crept into the market, especially in the two regions (City Bowl and Atlantic Seaboard) that have vastly outperformed the rest.
He points to topography as one of the (obvious) major supply-side drivers, but adds two others: the city’s “growing traffic congestion challenge” as well as “the fact that some of the city’s prime business and employment nodes, most notably the CBD (Central Business District) and Claremont, are in close proximity to the mountain”.
“This should imply a longer-term shift in a portion of residential demand towards areas closer in proximity to the Cape Peninsula, and we believe it has.”
* Hilton Tarrant works at immedia. He can still be contacted at firstname.lastname@example.org.