A property market lull is a common phenomenon in the lead-up to any national election on Wednesday. Buyers tend to be reluctant to undertake major, long-term investments without knowing if any new policies will be introduced that could affect the value or viability of their assets.
On a national level, South Africa has not been exempt from this pre-election trend. Most cities are reporting reduced market activity in 2019, including the City of Cape Town. However, while overall sales numbers remain relatively low for the year to date, statistics indicate a larger than expected number of Gen X and Millennial buyers active in Cape Town.
“Over 70% of purchases in Cape Town over the last twelve months have been by Gen X and Millennial buyers,” says Schalk van der Merwe, Rawson Properties Helderberg franchisee. “That’s 6586 transactions in total, with an average price of R2.386million, requiring an income in the region of R75k per month.”
Sales in the under-R3million price bracket – prime territory for younger buyers – not only failed to decline over the last 3 months (the most volatile pre-election period) but actually increased by a full percent. This, van der Merwe says, is strong evidence that younger and first-time buyers have bucked the pre-election property purchase paralysis trend affecting their elders.
“Where we do see concerningly low activity is the age group between 50 and 64,” says van der Merwe. “This group only equates to 20% of the market’s purchasing power, but has a disproportionate effect on properties over R3million. It’s perfectly understandable that this near-retirement-age group would have a relatively low risk appetite and be more cautious in the leadup to elections. Should we have a positive outcome at the polls, it’s very likely that they’ll return to the market towards the end of the year.”
Younger generations, on the other hand, with many years of career-building ahead of them, appear to be far less risk-averse than others. They may also be more optimistic about South Africa’s resilience in the face of political upheaval, showing little change in purchasing behaviour, even during particularly tumultuous events like the replacement of the former president Jacob Zuma.
“This is a very positive sign for the market in general,” says van der Merwe, “and provides vital stability while we wait for a more widespread market turnaround. As younger buyers advance in their careers and improve their affordability, they’ll also have a bigger impact on properties above the R3million threshold.”
While a full turnaround would certainly put a smile on many sellers’ faces, van der Merwe says Cape Town has largely escaped the worst of the recent property downturn.
“We may have had fewer sales, but we’ve seen 34.6% average growth in property prices over the past four years,” he says. “Sectional title schemes – which tend to be particularly popular with younger buyers – performed even better than average, with 58% growth if we include 2019’s sales so far.”
As for making the most of current market conditions, van der Merwe says it’s important for sellers not to jump to conclusions.
“It’s very easy to look at the statistics and make assumptions about buyers’ and sellers’ markets, but right now, we’re in an election market, and that’s a different beast altogether,” he says. “The youth market may be proving resilient to election pressures, but the uncertainty factor is still strong in older generations.
“Depending on where your property falls in the market – not just in terms of price, but also condition, type and neighbourhood – you’ll need a very different approach to selling effectively. It’s always best at times like these to partner with an experienced agent who can help leverage data and technology within your specific context to achieve the best possible outcome for you.”