SA’S BEST SUBURBS
WHEN global housing markets came crashing down in 2008/2009 from their lofty heights, many believed it would take at least a decade to restore sentiment in bricks and mortar as an asset class.
But six years after the credit crisis and subsequent recession hit the world, the recovery in house prices has been surprisingly robust in many countries. So much so that some markets, including Britain, Australia, Canada and Hong Kong, are looking frothy again.
However, the recovery in the SA housing market has not been a one-way bet, despite record low interest rates. It took four years for prices to get back to levels reached during the boom — the FNB house price index peaked around December 2007, bottomed in May 2009 and returned to the previous high only in December 2011.
Since then it has been a stop-start rebound. National house prices rose only around 25% on average between January 2012 and April 2015. In real terms, after adjusting for inflation, the FNB index is still 18,3% below its December 2007 peak.
There are various reasons why SA’s housing recovery is taking longer than that of other markets. For one, local banks have yet to reopen their lending taps: most require cash deposits of 14% on average, according to mortgage originator ooba.
FNB property strategist John Loos says more stringent liquidity requirements imposed by Basel 3 have also forced banks to be less generous on home loan pricing. Ten years ago most buyers qualified for prime minus two percentage points on a mortgage loan. Today the norm is prime plus one, irrespective of your credit record or how much you earn.
That means monthly mortgage repayments have risen markedly on new loans. Add slower house price growth and rising property transaction costs to the equation and it is clear why South Africans are not moving house as often as they used to.
Loos says he won’t be surprised if the life span of the average home loan lengthens to at least 10 years, more than double the norm at the height of the boom. “The costs of upgrading to a more expensive property have become so prohibitive that home owners are staying put and renovating instead.”
The trend to stay in one property for longer is reflected in the fact that sales volumes are still nowhere near their heyday levels. According to latest deeds office figures, around 27 000 properties a month were sold across SA in the fourth quarter of 2014. Though that is up from the 20 000/month recorded in the first quarter of 2010, when sales hit rock bottom, current transaction levels are still down 33% from the 40 000/month high reached in mid-2007.
However, housing data for SA as a whole does not reflect the divergence in the recovery between individual cities and suburbs, says Paul-Roux de Kock, data analytics director of research group Lightstone.
In fact, the Financial Mail’s 2015 top suburbs survey, our fourth in partnership with Lightstone, reveals that demand-supply metrics have recovered to such an extent in select areas that prices in some suburbs have more than doubled in the past three years alone.
De Kock says unlike the boom days of 2004-2007, when house prices across the board were rising at double-digit rates, capital growth has become increasingly location-driven.
So though some SA home owners have barely recouped their losses since the slump, substantial wealth has been created for others. Gone are the days when virtually everyone was guaranteed to make a decent return on resale two or three years down the line, irrespective of whether you fancied Camps Bay over Kommetjie or bet on Dainfern instead of Dunkeld.
Other industry players agree that home buyers have been forced to become more discerning in their suburb selection. The potential to achieve above-market capital growth is now a key driver of home-purchasing decisions.
As Andrew Golding, CE of the Pam Golding Property Group, puts it: “Buying a residential property is still the largest investment that most people make. And as a consequence, all home buyers have an eye on the investment potential of their property.” Seeff chairman Samuel Seeff has a similar view, saying that the potential for capital growth and the ability to resell within a reasonable time frame are today uppermost in the mind of any buyer, irrespective of what price class they can afford. “While a home is as much about security and a roof over your head, you also want to know that you are making a good investment.”
Seeff says though affordability and life stage are important factors in choosing where to live, suburbs that outperform on the capital growth front generally tend to have the following in common: a convenient location close to major transport routes with easy access to good schools, shopping, leisure, business and health-care amenities. Security, scarcity and the view (especially in coastal areas) are other drivers of demand and price growth.
However, Golding notes that there have been major shifts in buying patterns in recent years linked to the rising cost of home ownership, erratic municipal service delivery, electricity and water supply problems and increased traffic congestion.
Some of these trends clearly come to the fore in the Financial Mail’s survey, which singles out the top suburbs in terms of house price appreciation in Johannesburg, Pretoria, Cape Town and Durban over one, three and five years (to February 2015).
This year’s winning suburbs are ranked in three categories: low end, with houses priced at under R1m; midrange, R1,5m-R3m; and luxury homes, which typically sell for more than R3m. Only suburbs and estates comprising at least 50 properties and those that recorded more than five sales a year are included.
De Kock says though one- and three-year figures are interesting as they often reveal new suburbs to watch, it makes sense to focus on the five-year growth statistics. “A five-year time span provides a more reliable picture of the areas that have benefited most from the recovery.”
One of the themes that has emerged from this year’s survey is the search for value. Many of the affluent suburbs that in previous years notched up hefty price growth have made way for lower-priced luxury suburbs, with average values of below R4m.
In addition, Cape Town has generally shown stronger price growth than the other three cities, no doubt driven by the perception that it offers a more desirable lifestyle and is better run from a local government perspective.
It also appears that there are now two distinct types of home buyers: those seeking an urban lifestyle in well-established, higher-density neighbourhoods close to major business hubs and public transport infrastructure; and those who prefer a more relaxed, country ambience within gated estate communities, often located on city outskirts.
Even Capetonians, who until recently weren’t as keen on security estates as their Gauteng counterparts, are increasingly taking to them.
Unlike last year, when many of Johannesburg’s winning suburbs included newer, gated estates on the city’s northern outskirts, a number of this year’s winners are well-established neighbourhoods located within the ring road. That suggests increased demand in areas close to established business hubs to minimise travel times.
Parkhurst, close to Rosebank, is Johannesburg’s top-performing upper-end suburb, with price growth of 178% over five years. Alex Dicks at Pam Golding Properties’ Hyde Park office says the Parkhurst residential property market has benefited hugely from the surge in commercial and retail development in Rosebank and Sandton since the advent of the Gautrain in 2010.
The suburb offers a village-type lifestyle with a bustling art, design and restaurant scene, and is close to some of the city’s best schools.
Dicks says properties have manageable gardens — stands are generally between 600m² and 800m² — and offer a lock-up-and-go lifestyle that appeals to young professionals in particular. Prices for “golden oldies” start around R2,2m and a spruced-up four-bedroom home can fetch up to R6,5m.
Parkwood, sandwiched between Oxford Road and Jan Smuts Avenue, near Parktown North, Craighall and Dunkeld, also did well in the R3m-plus category, outperforming Jozi’s traditional old-money belt in Westcliff, Hyde Park and Sandhurst.
Johannesburg’s midpriced ranking is dominated by suburbs that haven’t appeared in the survey before, including Epsom Downs, off the N1 western bypass and William Nicol Drive in Bryanston, and Barbeque Downs, between Midrand and Sunninghill.
Epsom Downs, home to the head offices of a number of large corporates, is particularly popular among young families as it offers a variety of townhouse and cluster developments for R1,5m-R3m. It is within easy reach of top-end shopping and restaurants at Nicolway, Hobart Shopping Centre and the recently revamped Epsom Downs Shopping Centre. Good schools nearby include Bryandale Primary, Bryanston Primary, Brescia House and Michael Mount Waldorf.
Johannesburg gated estates that continue to outperform are Eagle Canyon Golf Estate in Honeydew on the West Rand, Kyalami Estates near Midrand, and Thornhill Estate and Lakeside Village near Modderfontein’s scenic nature reserve northeast of Sandton.
Country estate living is still very much in vogue in Pretoria.
The city’s winning suburbs include a number of the usual suspects such as golf estates Silver Lakes and Woodhill in the east, and Irene Farm Villages and Centurion Golf Estate to the south. Waterkloof Golf Estate, within the neighbourhood historically favoured by Pretoria’s medical, academic and diplomatic fraternity, also features in this year’s survey.
However, Pretoria’s top-performing suburbs in all three price categories are all Centurion-based, south of Pretoria en route to Midrand. Centurion’s new-money enclave of Blue Valley Golf Estate off the N1 takes top honours in the luxury category. Blue Valley prices have surged 147% over the past three years.
The golf estate has become particularly popular among the black elite, says Annaline Prinsloo of the Re/Max Jowic branch. Buyers are attracted by the estate’s secure, outdoor lifestyle, close to both Johannesburg and Pretoria. Prices for luxury standalone homes range from R2,8m to R13m.
Pretoria’s midpriced category is led by Centurion’s Zwartkop Golf Estate, which was established on the old Zwartkop Golf Course in 2005. Once fully developed, the estate will consist of 188 standalone houses and 95 clusters and apartments, ranging in price from around R450 000 to R7m.
Prinsloo says Zwartkop Golf Estate appeals to buyers looking for premium security and lifestyle. Apart from the 18-hole golf course through which the Hennops river meanders, the estate also has the Dale Hayes Golf Academy, a hair salon, wine club, library, pro shop, spa and gym, as well as bowls, tennis and squash courts.
Centurion’s Glen Lauriston not only ranks as Pretoria’s best-performing entry-level suburb but also second best overall across all four cities over five years with an impressive 389% price gain.
Rodney Augustine of Seeff’s Centurion branch says Glen Lauriston consists mainly of sectional title units, with Eldo Lakes, bordered by a nature reserve and the Hennops river, being the most sought after gated community within the area.
There were few surprises here, with traditional favourites along the strip from Durban North to Umhlanga Rocks again dominating the middle and upper end. The small up-market enclave of Virginia in the Durban North area, Glen Ashley and Mount Edgecombe golf estate are top in the R3m-plus category.
Virginia, which had price growth of 152% over five years, lures wealthy buyers who want to be near the north coast beaches, good schools, Virginia Airport and the Beachwood Country Club. Large family homes with expansive gardens and entertainment areas and sea views are priced from R2,5m upwards.
Umhlanga Rocks and nearby La Lucia, long favoured by Durban’s “high net worth” buyers, also continue to shine. Cotswold Downs, a relatively new golf estate in the Kloof area 20 minutes drive from the CBD near Pinetown, is the top-ranking midpriced suburb. Average prices at Cotswold Downs have nearly tripled over the past five years.
Alwina Muggeridge, Pam Golding Properties’ area principal in the Kloof, Hillcrest and Waterfall area, says Cotswold Downs appeals to golfers, young families and retirees looking for a slower pace in a spacious, countrified environment. The estate offers a mix of freehold properties and townhouses priced at between R800 000 and R3m.
North Beach, within easy walking distance of hotels, restaurants and uShaka Marine World on Durban’s touristy Golden Mile, appears to have undergone a rejuvenation. The area, with mostly entry-level apartments, showed a price gain of 32% over the past year alone.
The search for value is also becoming increasingly evident in Cape Town. Atlantic Seaboard suburbs like Clifton and Camps Bay (with the exception of Fresnaye) and their southern counterparts Constantia and Bishopscourt, where buyers may fork out R20m and more, have been replaced in the capital growth stakes by more modestly priced suburbs such as Stonehurst Mountain Estate at the base of Ou Kaapse Weg in Cape Town’s southern suburbs, and the once-sleepy rural hideaway of Noordhoek on the southern peninsula, about an hour’s drive from the city bowl.
Stonehurst comprises townhouses and standalone properties priced between R3m and R15m. The estate occupies an elevated position backing onto the Westlake Golf Course, with views of the Constantia Valley and False Bay.
Noordhoek, with an average sales value of just over R3m, notched up the highest price growth across all four cities over one year, with values up 34% on average. Seeff Noordhoek agent Roni Finlay says the area, fronted by the 8km Long Beach, has become increasingly sought after because of its rural tranquillity and outdoor lifestyle, with horse, cycling and walking trails.
Finlay says Noordhoek property prices have been supported by an influx of Johannesburg and Pretoria buyers relocating to Cape Town. It offers a mix of standalone homes and gated estates, priced from R1m to R11m.
City bowl suburbs such as Mouille Point, Higgovale, Tamboerskloof, Oranjezicht, Three Anchor Bay and Observatory appear in the one-year rankings. This suggests growing demand for homes close to work and entertainment, as well as improved public transport infrastructure.
Avalon Estate in value-for-money Durbanville in Cape Town’s northern suburbs is the top midpriced contender over one, three and five years. It has achieved the highest growth of all SA suburbs over five years — a 410% capital gain.
Annien Borg, MD for Pam Golding Properties in the Boland & Overberg, says Avalon appeals to entry-level buyers as well as retired couples.
The estate is close to the Cape Gate and Pinehurst shopping centres and Curro Private School. Modern, three- and four-bedroom full-title homes, inspired by 17th-century Cape design, are priced from R1,5m to R3m.
Somerset West, within easy reach of Stellenbosch and the Cape Winelands, has also become a front runner among those who opt for estate living. Gated communities in the Somerset West area that have shown strong price growth in recent years include Schonenberg Estate, Boskloof Eco Estate and Helderberg Village.