The seventh annual FM top suburbs survey shows where you should place your bets for wealth creation in the housing market. With prices facing a lull, and houses spending twice as much time on the market as in 2007 it’s more important than ever.
It’s a sign of the times that even in Cape Town, a city known as much for its rocketing property values as for its postcard beaches, estate agents have been battling to shift luxury homes.
The high point this year came in May when Seeff sold a triple storey mansion in De Wet Road in Fresnaye, known as one of the city’s few wind free suburbs, for R55m to a businesswoman and her husband.
The house, built in 2008, has over the top luxuries including a cinema, an outdoor and indoor pool and three different kitchen areas, alongside more routine features such as four en suite bedrooms.
But the point is, this was believed to be the highest price fetched in Cape Town this year. This suggests that while the city’s luxury housing market may not be as cold as the icy waters off Clifton’s beaches, it’s far from the red hot market of a few years ago. Last year, for example, one super luxury 400m2 penthouse at the new Silo 3 development sold to a man coyly described as “a local businessman” for R84m.
And in 2016, Clare Wiese, the daughter of Shoprite’s chair Christo Wiese who hasn’t had a great year himself paid R90m for a mansion on Clifton’s famous Nettleton Road. That same year, a German couple paid the record price of R290m for a seven-bedroom mansion in Bantry Bay.
The bad news is that few, if any, South Africans will have made money on their residential bricks and mortar investments this year.
For 2018, the average house price grew by a measly 3.7%, according to FNB property sector strategist John Loos the lowest growth in seven years.
More alarmingly, it’s the third consecutive year that house prices will fall in real terms once you strip out the effect of inflation. And this trend is expected to continue next year.
Even Cape Town homeowners, who in recent years were seemingly immune to the general slump in housing demand, are now feeling the pinch.
Sales volumes reportedly fell by more than 30% in the Mother City this year, driven partly by the water crisis, the DA’s poor handling of its sacking of mayor Patricia de Lille, the land expropriation issue which chased away foreign buyers and the depressed state of the wider economy.
There are bright spots. The winter rain has led to a rebound in Cape tourism and estate agents have apparently found quite a few takers for luxury holiday rentals on the Atlantic seaboard of up to R100,000 a day. But investors are still putting buying decisions on hold. This is particularly noticeable at the wealthiest end of the housing market, where demand has cooled after a stellar five-year bull run.
In Cape Town’s Atlantic seaboard, for instance, price growth slowed to 1.9% in the second quarter from a high of 27.7% year on year in the fourth quarter of 2016, according to FNB’s latest house price data.
It’s even worse in other cities and towns across SA. Higher living costs, the VAT hike of one percentage point in February, and an economy that experienced a technical recession, forced cash strapped consumers to reconsider homeownership.
In December, Reserve Bank governor Lesetja Kganyago hiked interest rates by 0.25% which, coupled with Eskom’s renewed load shedding, is bound to dampen housing activity more over the coming months. This is why the FM’s annual suburbs survey our seventh in partnership with research and analytics group Lightstone Property could not have come at a better time.
Lightstone analytics director Paul Roux de Kock says that when times are tough, homebuyers want to make doubly sure they put their money into an area that has the potential for capital growth. “Suburb selection becomes more important than ever,” he says. The dynamics have changed too, with deep implications for the market.
For example, South Africans are staying in one house for much longer now than, say, a decade ago. So buyers need to weigh their decisions more carefully these days.
De Kock says the bank’s average “bond cancellation term” now exceeds 10 years but it was just four to six years during the 2004 – 2007 heydays.
Apart from the potential of capital growth, he says other factors that drive buying decisions include proximity to one’s workplace, security, and access to infrastructures such as schools, hospitals and shopping centres.
Key trends that emerged from this year’s survey include:
- Prices in all three categories in Cape Town have grown at nearly double the rate of their Johannesburg, Pretoria and Durban counter parts over the past three and five years. Despite that, growth has slowed dramatically in Cape Town over the past year, particularly in luxury suburbs;
- Demand for properties in secure, gated estates is well entrenched, with estates leading the way when it comes to capital growth in all four cities;
- The search for value has intensified. Homebuyers are looking increasingly to live closer to the place they work to save on fuel costs. In Johannesburg the trend is underscored by the appearance of a number of older, affordable areas inside the ring road;
- There is a shift to well established, tried and tested suburbs, especially at the higher end. This is most likely an indication that wealthy buyers have reduced their appetite for risk during tougher economic times.
The Mother City’s well-heeled buyers have been gravitating back towards the established Atlantic Seaboard hot spots such as Fresnaye and Camps Bay.
Besides the R55m purchase on De Wet Road, recent high priced sales included a R36m purchase on Ocean View Drive. Though many of Cape Town‘s luxury suburbs had a drop in prices this year, the Atlantic seaboard still managed to lure a number of big-ticket buyers prepared to fork out R30m or more for a plush abode.
Lance Cohen, a luxury property specialist at Seeff Atlantic seaboard, says Fresnaye, Bantry Bay and Clifton still top the buying lists of the super wealthy.
“It’s primarily the views and location that draw high net worth buyers, local and foreign, to these suburbs. Expect to pay anything from R18m to R180m for a house with good ocean and or mountain views: he says.
But Capetonians are following people from Gauteng in gravitating towards estates.
While longtime favourite Atlantic Beach Golf Estate, overlooking the ocean near Melkbosstrand on the West Coast, has lost none of its appeals, a number of gated estates that haven’t previously appeared in our survey are in the rankings this year.
This includes Silverhurst Estate in Upper Constantia, Fernwood Estate a small, quiet enclave tucked away in Newlands in the southern suburbs , Clara Anna Fontein in the northern suburbs near Durbanville, and Lake Michelle The Lakes in Noordhoek.
Silverhurst, a beautifully landscaped estate set deep in the Constantia Valley with in a 30 minute drive to Cape Town‘s CBD and airport, even pipped its Atlantic seaboard counterparts over one year when it comes to price growth. Prices at the estate range from about R8m to R20m.
Clara Anna Fontein is one of Cape Town‘s largest lifestyle estates, with 344 self stand ing houses, 126 townhouses, 125 retirement homes under the Oasis Life umbrella, as well as a Reddam House school. Developed by the Rabie Property Group, it borders a nature reserve and is close to wine estates Durbanville Hills, D’Aria, Diemersdal, Meerendal, De Grendel and Nitida.
Colin Green, a director of Rabie, says since Clara Anna Fontein was launched three years ago, properties worth more than 1.2bn have been sold. The residential homes sell for between R2.1m and R4.3m, townhouses from R3.45m to R5.5m (170m2 – 281m2) and retirement homes from R2.3m. The once sleepy village of Noordhoek on the southern peninsula has become hugely popular among Capetonians seeking a country lifestyle within a 40-minute commute to the city centre.
Hayley James, an agent for Pam Golding, says: “Noordhoek offers a village feel and spectacular natural beauty. It has mountain views, pastoral lanes and a wetland area bordering an 8km stretch of beach.” Prices range between R3m and R7m while erf sizes average 800m2.
Another coastal village that made the FM’s rankings for the first time is Murdoch Valley in Simon’s Town on False Bay. Beverley Goldhill, an agent for Lew Geffen Sotheby’s International Realty, says Murdoch Valley’s prices are below those of the Atlantic seaboard. “Prices range from about R4.5m for a three bedroom family home to R20m plus for seafront designer homes with all the bells and whistles,” says Goldhill.
Oranjezicht in the city bowl also ranks highly in the R3m – R6m category over five years. The suburb, near the city centre and on the MyCiti bus route, has an array of restaurants, shops and sprawling De Waal Park, a well frequented dog walking spot.
The standouts in Cape Town‘s midpriced category R1.5m – R3m are Dennegeur in Somerset West and perennial outperformers Avalon Estate in Durbanville and Parklands North in Milnerton.
Dennegeur, which is positioned against the slopes of the Helderberg with ocean and mountain views, offers high density security estates including Fairhaven Country Estate and Meerhof Estate.
Beatrix Joubert, manager of RE/MAX Helderberg, points out that the Reddam House private school and shopping centres such as Vergelegen Plein are within easy reach. “Waterkloof, SA’s top restaurant according to Eat Out, is around the corner,” says Joubert. Prices range from R2.5m to R5m and higher.
Parklands North in the Blouberg area is another suburb that scores high on the val ue for money front, says Caron Leslie, own er of RE/MAX Property Associates in the Milnerton area.
Parklands North is situated close to Blouberg beach, various shopping centres, MyCiti bus routes and schools including Curro Private School, Parklands College, CBC St John’s and Elkanah House.
Leslie says prices in security complexes start from 1.75m for a three bedroom, two bathrooms home with a small garden and go up to R3m at the top end, which will buy you a large home with the latest modular design and finishes.
Joburg’s super-rich have also reverted to well established, centrally located suburbs within the ring road.
This year, the areas of Hyde Park, San dhurst and Atholl reign supreme in Jozi’s top-end category of homes worth more than R6m. Location underpins the value here. All three suburbs are within easy reach of the city’s main business hubs Sandton and Rosebank, most of Joburg’s top private schools, shopping centres, restaurants and sports clubs.
Hyde Park is home to 4th Road, arguably the most expensive street in Gauteng. Sandhurst’s Coronation Road would run it close.
Both streets, popular among the city’s captains of industry and self-made billionaires boast a number of palatial homes worth up to R100m. Prices in all three suburbs start at about R1Om for stand-alone older homes with large landscaped gardens, while smaller cluster homes typically sell from R5m upwards.
Illovo, similarly well located near Rosebank and Sandton, is Joburg’s top performing suburb over five years in the R3m – R6m range.
It also appears that Joburg residents’ propensity for gated, communal living is well entrenched. For the third year running, Lakeside Village and Thornhill Estate, two lifestyle estates near Modderfontein’s scenic nature reserve northeast of Sandton, dominate the mid to higher priced rankings.
Both Lakeside and Thornhill appeal to buyers looking for an outdoor lifestyle near mountain biking routes and walking trails. Nearby schools include Saheti, King David, St Andrew’s and St Benedict’s.
The burgeoning Fourways node, on the city’s northern outskirts with its bevvy of upmarket golf and lifestyle estates including Dainfern, Steyn City and Fourways Gardens, also appears on homebuyers’ radars.
This year, Cedar Lakes makes its debut as one of the top performers in the R3m – R6m category. The estate is adjacent to Cedar Road and close to the Fourways Mall and the Fourways Life Hospital. The mall is undergoing a huge redevelopment. Nearby schools include Crawford, Dainfern College and Steyn City Preparatory & College.
Martina Forsyth, Pam Golding Properties area specialist, says people like Cedar Lakes for its green belt areas and walking trails, fishing on a catch and release basis, as well as other lifestyle amenities. But the price is an advantage: starter homes can be had from R2.5m while large, opulent properties typically fetch up to R6m.
Another new contender in the R3m – R6m category again, a gated community is Aspen Hills Nature Estate, near Mulbarton in the south of Johannesburg. Situated 10km from the Johannesburg CBD, Aspen Hills is an eco friendly estate amid lakes and parks. Prices range from R3.5m for new three bedroom sectional title units to 15m for large six bedroom free standing houses.
At Joburg’s more affordable end of the market, priced below R3m, there has been a discernible shift towards older, value for money suburbs within the ring road that offer gentrification potential.
The Randburg area has become appealing to buyers looking for fixer-uppers: Linden, Fontainebleau, Aldara Park and Franklin Roosevelt Park have shown robust growth.
Ever-popular Killarney, which is almost entirely made up of sectional title apartment blocks, also features prominently in the midpriced category. Spacious, renovated apartments in many of the suburb’s Art Deco and Manhattan style buildings typically sell for between R800,000 and R3m. However, prices have already escalated by a whopping 46% over the past five years.
Charles Vining, MD of Seeff in Sandton, says Killarney is favoured among young creatives, doctors, academics and banking executives because it is close to the Joburg CBD, Wits University and hospitals.
The Jacaranda City has the largest number of gated estates in this year’s rankings of all four cities. The trend towards secure, countrified living is particularly in vogue among Pretoria home buyers.
Most of the action, it seems, is taking place in the Centurion and neighbouring Irene area, probably due to their central location between Pretoria and Sandton. There are about 60 security estates in Centurion.
Price options span the entire spectrum starting at about R1.5m in midpriced Heritage Hill, Candlewoods Country Estate, Amber field and Thatchfields, but going as high as R30m in top end estates such as Cornwall Hill.
Angelique Martins of Lew Geffen Sothe by’s International Realty says that Centurion, as a junction on the N1 highway between Joburg and Pretoria, offers the perfect balance between city life and country living.
In the midpriced category, this includes Blue Valley Golf & Country Estate and Candlewoods Country Estate.
Centurion Golf Estate, which includes a conference centre, consists of 860 properties, of which 80% are freehold going for between R3m and R10m and 20% sectional title typically selling for R2m to R3m.
Southdowns Estate in Irene was built on land that was originally part of the neighbouring 120 year old Irene Dairy Farm and is a “green living” estate. All properties have piped gas and water reticulation plants. Townhouses are priced from R2.5m while freestanding homes sell from R4m.
By contrast, the Blue Valley Golf & Country Estate is a “new money enclave”, though it is one of the fastest growing gated communities in Gauteng. It is also the only mid-priced estate that has topped the rankings over one, three and five years. Properties are also cheaper than many other golf estates in Gauteng, with prices starting from about R2.5m.
Irene Farm Villages consists of about 650 freehold properties, going from between R2.65m and R6m. Candlewoods, built on a historical heritage site on an old farm, is especially popular with young families and business people commuting to Johannesburg, with properties going for between R1.7m and R2.5m.
But the wealthiest suburb that comes up trumps over five years in Pretoria is Water kloof, midway between Pretoria‘s central and eastern suburbs. It is a well-established favourite among the city’s medical and academic fraternity due to its central location near the University of Pretoria and many of the city’s hospitals. Prices for large luxury homes with lush gardens and pools start at around R4m.
The top contenders among high-end homes costing more than R3m, offer few surprises. Still, a notable trend is the continued migration of Durbanites towards the city’s north coast.
Suburbs and estates stretching from Durban North to Umhlanga Rocks and neighbouring Umdloti and La Mercy have once again performed better than areas closer to Durban central. The winning suburbs on Durban‘s north coast include Izinga, golf estate Mount Edgecombe, La Lucia, Virginia and Glen Ashley.
Brett Botsis, Seeff Umhlanga’s sales director and licensee, says the north coast’s housing market has been boosted by thriving development activity. The opening of King Shaka International Airport at La Mercy in 2010 was a major catalyst for new money flowing into the region.
In the past 24 months alone, two new malls have opened in Umhlanga: Cornubia 66,000m2 and Pearl Walk 12,500m2 . A third, Oceans 33,000m2, is under construction. Botsis says the mixed use Sibaya Coastal Precinct, driven by JSE listed Tongaat Hulett, is also luring more residents to Umhlanga as it is set to become one of the largest “live, work and play” precincts in SA.
Izinga Durban‘s top performing suburb over one, three and five years in the upper-end category is an access controlled neighbourhood, nestled in the rolling green hills just north of Umhlanga Ridge. Izinga consists of a number of smaller estates targeting buyers who are able to spend more than R3m for a home among its attractive walkways, waterways and indigenous landscaping.
Golf estate Mount Edgecombe, not far from Umhlanga, remains one of Durban‘s most desirable addresses, while Glen Ashley and Virginia, between Durban North and La Lucia, also continue to lure buyers. Both areas are characterised by large stand alone family homes, many with sea views. Glen Hills is another Durban North suburb that features in the midpriced ranking.
“Glen Hills offers good value and therefore is an accessible entry point into Durban North,” says Mandy Testa, area specialist for Lew Geffen Sotheby’s International Realty. Three bedroom townhouses sell for about 1.5m, while three bedroom houses with good sized gardens go for about R2.5m.
Testa says Glen Hills lures young families, aspiring professionals and investment buyers who prefer the spacious older properties that can be refurbished.
More inland near Hillcrest, Bothas Hill has emerged as a top performer in Durban‘s mid-priced category. A number of security complexes, retirement villages and golf estates have sprung up in Bothas Hill in recent years.
“But one can also still find spacious stand-alone three or four bedroom houses on one-acre plots. It’s also an equestrian area so it’s popular among people who want to keep their horses close at hand,” says Testa. Prices range between R1.5m and R4m.
So, when looked at holistically, the FM top suburbs survey illustrates that while the property market is far icier than in its heyday of 2005, there is still value to be had, provided you pick carefully.
Houses are still selling, though on average it now takes nearly four and a half months 17 weeks and six days to sell the average home in SA, according to FNB. At the height of the boom, it took about two months. Even two years ago, it was taking just more than 11 weeks to sell a house.
The consolation is that house prices are now representing better value than they have in ages, which should act as a lure for buyers as the economy improves in 2019.
TOP SUBURBS SURVEY – HOW WE DID IT
This year, the FM ranks suburbs according to price growth over one, three and five years in the four major cities: Cape Town, Joburg, Pretoria and Durban.
There are three price categories: the middle segment, which includes suburbs priced on average between R1.5m and R3m; the high-end category, which is in the R3m R6m range; and the upper end, where average prices exceed R6m.
The top category applies only to Cape Town and Joburg, as there were no suburbs in Pretoria or Durban where enough properties changed hands for over R6m.
Only suburbs that consist of at least 70% residential stock and where at least 10 sales were concluded in the past year were considered.
Price inflation was calculated for one, three and five years to the end of June.
Worst Performers – Where Prices have stalled
The generally subdued trend in house price growth means the gap between the best and worst performing suburbs has narrowed markedly.
While there isn’t a single suburb across the four major cities Joburg, Cape Town, Pretoria and Durban where prices have actually fallen in nominal terms over the past five years, there are a ‘” few neighbourhoods that have seen cumulative price growth of less than 20%. That compares with average price growth of 40% 70% for their top performing counterparts.
The weakest performing suburb countrywide according to Lightstone’s data is Point Waterfront in Durban, which managed only a humble 15% price increase since 2013. Another suburb on the ocean’s edge, Harbour Island in Gordon’s Bay near Somerset West, is also one of SA’s lowest growth suburbs over five years. Harbour Island marina development, fronted by a promenade lined with shops and restaurants, recorded growth of only 28% in the five years ended June.
Lightstone analytics director Paul Roux de Kock says price growth often stalls or falls in a particular suburb as part of a natural correction in the demand-supply equilibrium either because affordability issues begin to price buyers out of the area and lead to reduced demand, or when property developers bring new stock to an area that leads to an oversupply.
“In some cases, there could be more structural issues at play that can cause a decline in price growth, such as a significant increase in crime, a reduction or collapse of the industries supporting the local economy or a more competitive and affordable alternative offered by nearby suburbs and estates,” he says.
Mandy Testa, area specialist for Lew Geffen Sotheby’s International Realty, says in the case of the Durban Point Waterfront, prices could be beyond the budget of the young professionals who are the natural target market and who could buy similar homes in other areas for less. Some of the larger Waterfront apartments cost more than R4m. The state of surrounding CBD areas rejuvenation has been promised but hasn’t happened will have contributed to lack of interest “And the Waterfront cannot be accessed without passing through the CBD, which is a deterrent for some buyers,” says Testa.
However, Pam Golding Properties area principal Michelle Burger says a R35bn facelift is underway at the Waterfront, which includes the addition of a promenade. This could act as a catalyst for those chasing value in the housing market.