Cape Town

By: Cape Town City Property  11-11-2011

The company’s results for the financial year ending February 28 2011 reflect slow but steady growth in residential property sales in the Cape Town metro area.

PGP’s managing director for the region, Laurie Wener, says the past few years have been challenging ones for the property industry, but PGP’s unit sales in this area have increased by about 10 percent compared to the financial year ending February 2010, and by 13 percent in total sales value over the same period.

“Although market recovery is gradual and is slower in some price brackets than others, there is some degree of improvement across the board, which is an encouraging sign,” says Wener.

She says the sectional title market showed a significant pick-up in activity, particularly in the final quarter of the financial year.

“This rising demand has been so significant that in some areas such as the City Bowl, the sectional title market currently exceeds the value of traditional full-title sales. These are mostly sales to South African end-users who are buying apartments to live in, many of them with 100 percent cash or very high levels of equity. The demand is across all price ranges, from entry level units priced at under R1 million, to luxury apartments priced from R15 million to R18 million.

“Buyers are recognising the appeal of a more compact, easy-to-manage lifestyle, where a number of the costs of living are incorporated in their purchase, such as security, maintenance and amenities like pools and gyms. Many of these sectional title homes are also close to places of work, which significantly reduces the owners’ transport costs, which is no small factor in the face of congested highways and rising fuel prices.

Wener adds that there has also been a conservative resurgence of investor interest in such units, mostly from buyers using their high levels of cash equity to negotiate favourable deals.

Another segment experiencing particularly high demand is the rental market, which has grown over the past financial year, particularly at the top end of the market.

Wener says a number of factors have contributed to performance in this sector, including the increase in the number of businesses that want to relocate to Cape Town or set up additional offices in the city.

Returning expatriates are also often interested in renting properties while they assess job opportunities and decide where they intend to settle permanently.

“In general people want liquidity in tough financial times, so some would-be buyers are opting to rent for the time being, until they are more financially secure. Even some financially stable clients are choosing to rent rather than buy – and are prepared to pay high monthly rentals to secure top-quality homes.”

Although the development market has been quiet during the recent market slump, Wener says there have been signs of resurgence during the past financial year.

“Completed developments are selling steadily, mostly to end-users. There is also considerable renewed interest from developers who want to discuss potential new projects that may be launched in the coming year or two.”

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This was better than the 8,8% achieved in 2009, but at no point over the past decade has SA commercial property delivered negative returns, unlike other markets surveyed by the IPD, such as the UK, the US and Ireland. According to property consultant Erwin Rode, office rentals are up between 3% and 5% in the last quarter of the year in the decentralised nodes in Johannesburg, Durban and Pretoria.