Cape Town rental market reality check

A quick review of articles online, reporting on Cape Town rental prices, turned up a range of headlines.

Cape town rental prices skyrocket – Feb 2017

Rental markets are under pressure – Feb 2018

Cape Town rental market to remain in the Doldrums – March 2018

Southern suburbs rentals cheaper – May 2018

In December 2017 segments of the rental market started showing signs of strain. By May / June this has become a prevalent feature in practically all markets we operate in – Only rentals below R8,000 are still holding up. We manage properties for clients from the City Bowl through to Plumstead and all markets are under sever strain.

Owners at the upper end of the market have in some cases accepted lower rentals this year than they were earning 2 years ago. The lower end of the market between R6k – 8k has been more resilient with landlords achieving increases of 5% on average.

The cause of the slow down is not down to one factor. Different market segments (Apartments / Houses, City Bowl / Suburb, Premium / Standard ) are affected by a combination of factors.

Drought,
Tenant fatigue (arising from the strong run on CT rentals in the past few year),
New stock coming to the market,
Air B&B investors reverting to the long-term rental market following a poor year and
General economic and political uncertainty that has reduced enthusiasm.

The general consensus is that conditions will not change in the short term. Once the drought and politics / economics begin to move in the right direction we can expect property market to begin to shift.

We expect that the next 12 months will be a period of consolidation and reset in the market. This could take longer if there is not clear direction from the economy – we should look for GDP growth to improve considerably (2.5% to 3%) and to stabilise at that higher level before expecting a significant change.

In the meantime owners should be working to;

Keep their rental properties in good condition so that they are in ready for marketing when they need to find a tenant
Do everything possible to keep good tenants (tenants that pay well and look after the property nicely).
Price your property competitively when marketing or re-negotiating .
Ensure that your tenant vetting process is robust – the cost of taking on a bad tenant exceeds the benefit.
Ensure that current tenants are carefully managed.

December 6, 2017March 30, 2020

The Blues – Rondebosch / Claremont Property Market update Dec 2017

Intimate market knowledge is a critical aspect of the service an Estate Agent provides to clients. I track homes that come to the market in the Rondebosch / Claremont area and analyse their performance.

The issue is price expectations – sellers are pricing homes for the peak of the market and holding out for their price. They do not realise that the rate of price increases has been slowing for the past 5 quarters in the Southern Suburbs.

Buyers are holding back for a variety of reasons mainly because of affordability but also because of economic and political uncertainty. These influences are beyond the control of sellers.

This is not a doom and gloom situation; prices are still rising but not as quickly as in the past.

The current market conditions create a situation where buyers have more choices and are not under pressure to make offers, the market has become a buyers market.

Now more than at any time in the past 4-5 years it is vital for sellers to appreciate that Price + Presentation = Saleability

Price

Know what you are up against – Potential buyers are well informed;

They find out what properties were bought for.
They research how long properties have been on the market and use various websites to calculate a current valuation.
Buyers don’t have to visit a property to get a feel for what it offers. Most good agents provide internal and external photographs, floor plans and 360 degree video. There is little mystery left as to what is behind the front door.

How to get it right –

Be realistic about your selling price; ask a variety of agents for their perspectives and ignore ‘valuation flattery’ where an agent is overly optimistic to seduce you into a mandate.
Do your research into the competition – which other houses will your potential buyers be looking at and how does your property compare?
Be objective, see those houses and yours through “buyers’ eyes”, it can be difficult to be rational, so get others opinions.

Presentation

First impressions count – In every aspect of modern lives, presentation is critical – both for the photographs and 360 tours which potential buyers will view and for the actual physical viewings.

Get professional help – It is not advisable to spend a lot of money when selling, but unless your home is in a permanent state of perfection, which very few are, a small investment may help you to achieve your sale price, or achieve any sale at all.

Get a professional Agent or home stager to give you an objective second opinion and recommend where to put your time and effort in getting the presentation up to the required level for photographs and viewings. Simple things such as de-personalising your home to allow potential buyers to imagine themselves living there and decluttering to maximise space and appeal, can be crucial in securing a sale.

October 9, 2017March 30, 2020

Rondebosch / Claremont Property Market update Oct 2017

Price Pressure

Nationally property prices have been under pressure with some suburbs showing declining real house price over the past few months.

In Cape Town; the remarkable strength of the housing market over the past few years has started to show signs of slight weakening.

The average time a home is on the market before a sale has increased over the past 6 months. It now takes close to 20 weeks on average for a home to sell in Cape Town. A market is considered to be in equilibrium when homes sell in +/- 12 weeks.

With homes staying on the market longer there is a risk of a real house price correction. There is minimal fear of a local (Cape Town) bubble and the risk of significant price declines is considered to be very low.

However, price increases in the Cape Town market are expected to gradually return to the longterm trend line for house price inflation. The spectacular increases seen over the past few years are unlikely to continue.

Have you been holding onto you home, enjoying the 10% +annual increase in value over the past few years? Have you also been thinking about a change? With holding costs (rates, insurance and maintenance) increasing all the time, Now may be the time to begin planning for that change.

In the Claremont and Rondebosch market we started have started to see pressure being transferred to sellers. Over the winter period, average days on the market began getting longer, and in some cases homes were removed from the market not having sold.

Strategies for serious sellers in the current market;

Prepare your home carefully for sale – get ready to show its best face.
Ensure that you price competitively relative to similar homes on offer.
Be ready to negotiate.

Every home is unique and offers different benefits to the market. Its always a good idea to consult a professional agent before putting your home on the market.

March 30, 2017April 1, 2020

Semigration* and Topography Drive Cape Town Property Prices

Western Cape is the only province showing significant house price growth in 2016/17.

The real growth in Cape Town house prices is largely attributable to above average performance in 6 markets – Atlantic Seaboard, City Bowl, Near Eastern Suburbs, Southern suburbs and South Peninsula.

According to an article on Moneyweb.co.za this strong price performance is largely due to; the continuing migration of relatively wealthy South Africans to Cape Town and the Capetonian desire to avoid long commuting times which drives people to invest in homes close to their work place.

*Semigration refers to the tendency of people to migrate within SA rather than overseas.

February 2, 2016April 1, 2020

Property Market – Note

Recent press reports paint a picture of falling property prices across the country in 2016/2017.

Slowdown in SA property sales and Prices

While this may be true for the average property in South Africa, those lucky enough to own property in Rondebosch , Claremont and the surrounding areas should not be overly concerned.

There is still considerable interest from people all over Cape Town and South Africa in moving into Claremont and Rondebosch and the surrounding suburbs. The proven draw cards remain proximity to excellent educational facilities, business centres and easy connection to the rest of the city. Not to mention the local shops, restaurant and sporting facilities.

The Reverse Trek is real. Families are relocating to Cape Town to enjoy the excellent lifestyle and educational facilities. The reasons people give for relocating play directly to the strengths of the Southern Suburbs property market.

There are challenges in organising finance and buyers have become quite selective. The reduced exuberance of the buyers side of the market is compensated for by the fact that there are fewer homes on the market. There is still an imbalance in the local market which favours sellers.

It is my expectation that prices will remain strong and are very unlikely to fall despite the economic uncertainty. Sellers will have to be a little more patient and have more grounded expectations.

July 23, 2015April 2, 2020

Its still a sellers market but don’t over do it – Market update July 2015

Solid volume growth over the past few years flattened out in the first part of 2015. This is not altogether surprising since it reflects the realities of a stagnant economic environment in South Africa. In an interest rate hiking period (albeit small increments) and little real economic growth; one would expect volumes to remain stagnant.

Total sales value is almost back to the levels last seen in 2007, however in real terms (adjusted for CPI) the market is still almost 40% below the boom time sales level.

From an individual home owners perspective things are not all doom and gloom. The shortage of good homes on the market means that your home can sell quickly at very good prices. You should however avoid the temptation to over price your home. Buyers are turning over their pennies and will not over pay.

For more information; FNB-Property-Barometer_Property_Transaction_Volumes_and_Values_Trends_Jul_2015