Property outlook for 2018 focuses on sectional title

Everyone will agree that 2017 was a challenging year of ups and downs in the property sector. Of course if you are in the Cape, then your property has done considerably better than the rest of the country. Recent reports from the FNB Property Barometer indicate that although the market has slowed, it still performed much better than elsewhere.

2018 will be a year of much anticipation, largely directed by the outcome of the ANC’s Elective Conference. Expectations are high and most in the country are looking to the governing party to take a firm stance against corruption and move the economy back to a position of confidence and growth.

It is vital for the economy to settle down and start taking a turn for the better, but this depends on a number of factors that will influence the economy and property market. These include continued political and economic disruptions, further credit downgrades and rising costs and inflation which may necessitate a rise in the interest rates.

Regardless of this, we expect the Cape property market to retain a level of resilience. We have seen over the last two years that it has weathered the challenges better compared to the rest of the country. The sectional title sector, in particular across the high demand coastal areas such as the Atlantic Seaboard and City Bowl, continues to be the star performer.

Sectional title property holds a number of advantages which will support its resilience. Firstly, there is security and convenience, two factors which are now highly prized by buyers. This type of property is also more popular for rentals, both residential and short-term and holiday rentals and hence, there is the added element of investment demand.

This type of property is also often concentrated around, or close to business areas as we see with the Atlantic Seaboard and City Bowl and areas such as Century City, the Southern Suburbs and so on. That adds a further element, namely convenience, not just in terms of access to places of work, but there is usually a concentration of amenities in the vicinity, adding a walkability factor for buyers and tenants.

In areas such as the Atlantic Seaboard and City Bowl, sectional title sales now make up about 60% of all units sold and prices have risen faster compared to freestanding houses.

A recent Lightstone report points to price growth of 12% year-on-year in Cape Town’s house prices compared to about 3%-4% for the other major cities such as Johannesburg and Pretoria. It comes as no surprise then that property in the Cape is seen as an excellent investment. The Cape will also continue to attract people from other areas who want to relocate to the city which will further boost the market.

If we look at the Cape metro as a whole, then Lightstone shows that over 10,000 property transactions worth over R24.2bn have been recorded for 2017. That amounts to over 800 transactions and R2bn-plus in value each month, so there is clearly still plenty of activity.

An important lesson for the market, is that information technology has moved at a rapid pace and today’s buyers and tenants are far savvier about the economy and property market conditions. They are very aware of market trends and accurate pricing is therefore all important.