An analysis of Rawson Properties’ 2012 achieved sales prices nationally has shown that a slow revival in freehold property (with an annualized nominal growth rate of just on 6%) has been offset by the sectional title sector, where over the last year a large number of units have been in negative growth territory.
Drawing attention to this, Tony Clarke, Managing Director of the Rawson Property Group, said the he agrees with the FNB property economists, John Loos and Johann Swanepoel, who in a recent review attributed the poor negative sectional title growth to the exuberant ‘run’ on these properties in the 2005 to 2008 era. This, said Clarke, probably did result in their becoming overpriced and an adjustment now being necessary.
“Until quite recently,” he said, “the sectional title sector was very much ‘the flavour of the month’ and comprised almost 70% of all new developments in South Africa. As a result, in the boom period sectional title prices appreciated very rapidly.”
“Now, however, it is the turn of freehold property to catch up – which it is doing, albeit in a slow fashion, with real growth just 1 to 1,5% above the inflation rate.”
The revival of the freehold market, although unspectacular, said Clarke, makes this a good time to buy in this sector, the old principle of buying early on a rising tide always being a good one.
An analysis of sales figures in Cape Town indicates, too, that on a square metre basis the Northern Suburbs prices now offer significantly better value than those of the Southern Suburbs.
“I do realise,” said Clarke, “that comparisons here are difficult because the two precincts have different cultures and appreciate different designs, scenery and amenities. Nevertheless, it is relevant that, even in the upmarket sections, both of which have large numbers of excellent designs, prices are significantly less expensive in the Northern Suburbs than they are in the Southern Suburbs. In Plattekloof and Welgemoed, for example, average sales prices this year have been close to R3 million, whereas in Constantia they have been above R6 million.”
“Similarly, if one looks at the less expensive areas such as Brackenfell, with an average sales price of just on R1 million, they appear to offer better value than, say, Wynberg, where units, which are generally far smaller, have an average price of R1,4 million.”
Taking the precincts as a whole, said Clarke, the Southern Suburbs’ average price is around R2,8 million, whereas that of the Northern Suburbs is around R1,6 million.
One of the reasons for this big discrepancy, he added, has been shown by a recent Lightstone survey, which indicates that salaries of residents are significantly higher in the Southern Suburbs than in the Northern Suburbs. In the Northern Suburbs, only Plattekloof and Welgemoed have residents earning above R50,000 per month. In the Southern Suburbs, residents in Constantia, Tokai, Claremont and Rondebosch on average earn above R50,000 per month.
“These marked differences in income,” said Clarke, “will ensure that Southern Suburbs prices tend to remain expensive, but it should be noted that our survey does indicate that price rises in Northern Suburbs homes, particularly in freehold homes, are, percentage-wise, now slightly ahead of those of the Southern Suburbs and seem set for a continued, albeit slow, upward trajectory.”
