Western seaboard property market shows steady returns for buyers

Western seaboard property market shows steady returns for buyers
  • FAMILY CENTRAL: Areas like Sunningdale, with its good schools and proximity to shopping and medical facilities, are in demand on the Western Seaboard.

Cape Town’s western seaboard housing market from Milnerton to Melkbosstrand has shown remarkable average return on investment (ROI) of around 24 percent at the top end of the market above R5 million, followed by 18 percent in the price band between R 2.5m and R5m, both over the past seven years.

And in that same time houses in the R1.5m to R2.5m category showed an ROI of 16 percent and those priced under R1.5m a return of some 14 percent.

These are some of the results of an in-depth property survey undertaken by Lew Geffen Sotheby’s International Realty of one of Cape Town’s most desirable residential lifestyle destinations that offers something for everyone in property – from starter apartments to luxury seaside security golf estates.

“This market without a doubt represents the most stimulating and varied in Cape Town at present. Nowhere else in Cape Town do you find such a diversity of residential choices, this affordable and this close to the sea. It’s a market filled with new developments and it’s expanding by the day,” says company chairman Lew Geffen, who along with Atlantic seaboard franchise chief executive Brendan Miller has recently also taken over the western seaboard.

Geffen says since 2007 a total of 13 166 houses were sold worth almost R17.85 billion, and 5 020 apartments worth some R3.9bn were sold. On average house prices during 2014 stood at R1.635m for the whole area, and average apartment prices were around R900 000.

“Based on these figures, affordability is a major factor for prospective buyers on the western seaboard,” says Geffen.

He says 2 375 houses were sold in 2007 to the value of just over R3bn with the average house price at R1.265m.

“It’s very clear that this area was a major part of the boom that happened across the peninsula,” says Geffen.

“In 2008 came the worldwide credit crunch and the housing market bottomed out, with only 1 250 houses sold on the western seaboard worth R1.623bn. The average price was just slightly higher at R1.298m.

“Since 2008 the house market has rebuilt itself and in 2013, just five short years later, a total of 2 127 houses were sold to the value of R2.94bn – just short of the record year in 2007 in rand value and number of sales,” says Geffen.

Miller says the market has many points working in its favour. Key among these is the fact that it offers affordable prices, has a wide spectrum of choice to buy or to rent, it has the most affordable security estates in Cape Town and finally, iconic views of Cape Town can be captured from its beaches.

“The western seaboard property market is mainly driven by single title ownership (houses), but sectional title ownership is also high in demand and increasing steadily. From a property perspective the western seaboard is the only area left in Cape Town that has vast tracts of open development land.

“The market is ripe for considered, well-planned residential development because the country has a rapidly expanding middle-class and a substantial shortage of housing stock. One of the most exciting aspects of working on the western seaboard is the varied market.

“You have housing for everyone. For starter families you can still buy two-bedroom sectional title units for less than R500 000 in Parklands, but you can buy luxury right on the seafront in Atlantic Beach or Sunset Beach for up to R10m.

“The average house price improved by more than 25 percent from R1.265m in 2007 to R1.635m in 2014 and it is fair to say that favourable lending rates and a fairly stable economy in the past couple of years have contributed to the increase in house prices.”

Geffen says analysing the sales figures of 2014 year-to-date (1 527 house sales registered at the deeds office worth R2.495bn), the top end price band from R5m to R10m showed a lot more movement than in previous years – even before the credit crunch.

“For 2014 the total recorded at the deeds office so far is 37 houses sold to the value of R265m at an average value of R6.945m. During 2007 only19 houses were sold in this bracket, worth around R128m. In number of sales this price band improved by almost 100 percent,” says Geffen.

At the top of the area popularity list last year in the R5m plus price band comes Sunset Links Golf Estate which achieved the highest average value at R7.195m, followed by Big Bay at R7.08m, Bloubergstrand at R7.04m, Atlantic Beach Golf Estate at R6.8m, Sunset Beach at R6.19m and West Beach at R5.59m.

The average in the region for mid-range properties (between R2.5m and R5m) was around R3.45m, according to Geffen, but the largest movement was in the lower end of the market between R1m and R2.5m.

“Properties sold for an average of R1.445m in this price band but it definitely varies according to area, with Parklands, for instance, being generally more affordable than Blouberg.”

Miller says the sectional title market is also growing steadily on the western seaboard.

“The western seaboard offer buyers a wide choice in the luxury, middle and middle to lower end apartments at affordable prices with exceptional positions and large living spaces. Buyers can expect prices to range between R8 000/m² and R30 000/m² depending the location, type of finishes and condition of the apartment or sectional title unit.

“Luxury apartment blocks also offer a wide range of choices in the same development, depending on position, views and size. For instance, popular blocks such as Dolphin Beach and Ocean View in Table View and Eden on the Bay in Big Bay offer buyers units from around R1.5m to R5m,” says Miller.

“In general, the widest choice and sales of apartments, and most popular buys, are in the R1m to R5m price band.”

Geffen says many people who buy houses and sectional title units on the western seaboard do so because there is such a lucrative rental market in the area.

“There are excellent schools, the beachfront lifestyle is popular and with the MyCiti bus route makes the commute to town one of the easiest and fastest in Cape Town, so people want to rent there.

“The market on this side of Cape Town is generally long-term rentals, and depending on the property type and location houses can vary between R15 000 and R35 000 a month. Apartment rentals are generally between R5 000 and R15 000 a month, but there are some that are more expensive.”

Geffen says the western seaboard is a good location to invest in property.

“Whether you live there or you’re looking for a solid investment that will pay long term dividends while still delivering on monthly rentals, the western seaboard presents solid value for money across all price brackets.”



CT Southern Suburbs Property Price Growth

09 Mar 2015

The Southern Suburbs property market is arguably the most dynamic in Cape Town, with more than 1 200 house sales last year earning owners in excess of R4.2 billion.
This Constantia home offers a double volume entrance hall, four bedrooms, three and a half bathrooms, an open plan lounge and kitchen, an undercover patio, a double garage, three carports and secure off-street parking. It is on the market for R12.95 million – click here to view.

This is according to Lew Geffen, Chairman of Lew Geffen Sotheby’s International Realty, who says a seven year analysis of the property market in the Southern Suburbs shows that between 2007 and 2014, average house prices in the area have increased by 18% from R2.7 million to R3.19 million.

He says overall, across the Southern Suburbs,Atlantic Seaboard and City Bowl, freehold title sales levels have improved dramatically since the global economic crash that started in 2008.

At that stage, the freehold market was worth just over R6 billion, which improved by 48% to R8.886 billion by the end of 2013.

Geffen says much of that market movement was in the Southern Suburbs, which have always represented the most desirable picture of suburbia imaginable; quaint cottages or large homes on leafy streets radiating a sense of history that you’d be hard pressed to find anywhere else in South Africa.

“If Cape Town’s Atlantic Seaboard could be compared to a Ferrari, the Southern Suburbs would undoubtedly be a Bentley or a Rolls Royce.”

Claude McKirby, Co-Principal of Lew Geffen Sotheby’s International Realty in the Southern Suburbs, says buoyant demand for houses in all suburbs resulted in 2013 being the best year since 2007, when the property market peaked in terms of volume.

Situated in Bishopscourt, this house has four bedrooms, four bathrooms, an open plan living area, a fitted study, underfloor heating, an undercover patio and garaging for three vehicles. It is priced at R11.5 million – click here to view.

During 2013 a total of 1 575 houses were sold to the value of R5.024 billion, with an average property value of R3.19 million.

McKirby says South African Deeds Office sales figures for the first nine months of 2014 indicate that 1 211 houses in the Southern Suburbs were sold to the value of R4.24 billion. This total will increase as the property transfer information for the final quarter of the year is made available by the Deeds Office, he says.

According to McKirby, available freehold transfer information for 2014 indicates that the most active price band for house sales was between R2.5 million and R5 million.

Some 395 sales were recorded in this price range to the value of R1.328 billion, followed by the price band of R5 million to R10 million, in which 162 houses worth R1.062 billion were sold.

“Obviously when one looks at the top tier areas such as Bishopscourt and Constantia Upper, prices can exceed the R20 million mark. These suburbs are arguably the most exclusive in Cape Town and properties there are highly desirable.”

According to available data last year, there were 11 sales in the R20 million and above bracket, with the highest single sale recorded in Canterbury Drive in Bishopscourt, which was for R69 million.

This Bishopscourt home has four bedrooms, four bathrooms, TV room, air-conditioning, a tennis court, swimming pool, staff accommodation and security features. It is on the market for R25 million – click here to view.

McKirby says Bishopscourt led the pack all the way in this price bracket, with just six sales garnering owners a total of R189.5 million. Constantia Upper was next in line with three sales worth R63.5 million and Upper Claremont next with two sales worth R48 million.

The average rand value per individual sale in this price band is between R21 million and R24 million, he says.

Arnold Maritz, McKirby’s Co-Principal in the Southern Suburbs, says five suburbs stood out in 2014 in terms of recording the highest rand value in overall sales.

“These are sales recorded across all price ranges, but the rand value of the properties sold is an excellent indication of the desirability of these suburbs for prospective buyers. If there is a high turnover of property, it means that there is a substantial appetite for houses in those areas.”

According to available data, the suburb that garnered the highest value of sales last year was Constantia at R1.37 billion (229 sales), followed by Claremont at R592 million (166 sales), Bishopscourt at R397 million (only 24 sales), Rondebosch at R330 million (99 sales) andNewlands at R295 million (63 sales).

But perhaps the most important thing for people who are buying property to consider is the long-term return on investment, he says. The old adage is that one should buy the worst property in the best area that you can afford, and that does hold true to a large extent.

Situated in Constantia, this home offers three bedrooms, three bathrooms, an eat-in kitchen, lounge with a fireplace, covered patio, swimming pool and a double automated garage. It is currently priced at R14.5 million – click here to view.

Maritz says South Africa has a rapidly expanding middle class, though, and a substantial shortage of housing stock to accommodate them, so it’s wise to do your homework before buying any house.

“If you have the money, it might serve you better in the long term to invest in two lower-priced properties in a suburb that is showing a high return on capital investment over a period of seven to 10 years, rather than one in another suburb that is far more expensive with lower appreciation.”

Maritz says this option also presents the opportunity to earn rental income on one investment while living in the other.

Return on investment (ROI) is not a fixed rate over a period of time per suburb. He says it all depends on the state of your property when marketed.

All-round well-maintained properties sell faster, achieving higher prices than others that need extensive renovations and upgrading of, for example, kitchens and bathrooms, he says.

To use Tokai as an example, Maritz says a sample of 20 properties sold last year showed a nominal capital ROI of between 8% and 22% per year over seven years.

He says while around 8% is the median for the area, a ceiling return of as high as 22% can be achieved if a property is, for instance, substantially renovated and modernised during that period. Exceptional properties will attract higher prices, he says.

Geffen says while the largest percentage of the Southern Suburbs property market remains Capetonian buyers, purchasers from Gauteng and abroad are increasingly investing in the higher end of the market, particularly in security estates.

“According to our specialist agents in the area, last year alone there was more than 15% increase in unit prices of completed houses sold on security estates such as Stonehurst Mountain Estate.”

In the past year, he says buyers on these estates have included numerous South Africansreturning from living abroad, as well as ‘commuter families’ from Gauteng and citizens of the UK, the US, Portugal, Brazil, Russia, Switzerland, Nigeria, Ghana and India.

Geffen says entry-level prices in most parts of the Southern Suburbs are now above the R2 million mark.

The time to invest is now, especially if you’re trying to get your foot on the property ladder, he says. By this time next year, you’ll be able to add at least R300 000, if not more, to the price of any house you’re thinking of buying at the moment.

House prices will not be going down in the medium term and interest rates are likely to go up, so property will never be more affordable than right now, says Geffen.