02/08/2018
Cape Town Property market in trouble??
The information below has been extracted from an article in the Financial Mail by Joan Muller
02 February 2018
A year ago, there seemed to be no end to Cape Town’s ever-rising tide of house prices. Upcountry buyers were flocking to the Western Cape — at an average relocation rate of 10 families a day, according to Wesgro figures.
The search for a more relaxed lifestyle in scenic surrounds, backed by a general perception that the city is far better governed, under the DA, than other metros, fuelled a boom that made house prices in many sought-after areas of Cape Town double over the past five years.
However, Cape Town’s housing party appears to have come to a halt now that the reality of the water crisis has set in.
All things considered, wealthy would-be buyers, especially new entrants to the Cape Town housing market, are bound to put buying decisions on hold. Tourists, especially domestic ones, are also likely to go elsewhere for now.
Industry players say there was already a drop in upper-end holiday rentals over the festive season. Amongst other things, the city’s water restrictions, is blamed.
Affordability issues also play a role. FNB property strategist John Loos says semigration to the Western Cape is no doubt losing momentum on the back of the widening gap in house prices between Cape Town and other SA cities. "New entrants are simply being priced out of the market," says Loos.
Moreover, the image of the DA-run local and provincial government has been tarnished following the poor handling of the water crisis and internal wrangling among DA members.
Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, says sales volumes across Cape Town’s top-end suburbs are down around 30% year on year.
As a result, prices have already dropped in some suburbs. Geffen argues that it’s not the water crisis alone that is to blame for a turn in market sentiment but rather SA’s overall recessionary climate and low investor confidence.
"Some properties are selling for as much as 20% below asking price," says Seeff Atlantic seaboard agent Pola Jocum. She says sellers will have to become more realistic in their asking prices and stop using overpriced listings to guide their price expectations.
Priya Reddy, head of the City of Cape Town’s communications department says even if the "heavens open" very soon it will probably take a number of years before Cape Town’s water restrictions are lifted: "This is going to be the new normal."
While some estate agents believe the drought-induced dip in Cape Town’s status as SA’s prime property and tourist destination may be short-lived, the Mother City may well face a prolonged period of stagnation.
Meanwhile, it’s not entirely inconceivable that housing markets in Gauteng and KwaZulu Natal could stage something of a comeback over the next 12 months if recent semigrants decide to return to their former home grounds. Capetonians themselves may even start looking for "greener" pastures.
