- There is currently a rare combination of a record low repo rate of a very bearish market.
- This gives first-time buyers an excellent opportunity to get a foot in the door, according to a property expert.
- Affordable housing schemes are frequently not commercially viable, explains a developer.
Although the current property market is unpredictable due to uncertainty brought on by the impact of the coronavirus pandemic and related lockdown, the rare combination of a record low repo rate and a very bearish market is affording first-time buyers an opportunity to get into the market, according to Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty.
The repo rate of 3.75% is the lowest it has been since 1973.
According to Geffen, in most metros the lower end of the market is faring better than the other sectors, with pockets of higher activity in certain areas. Realistically priced properties in the affordable housing sector – particularly those near essential amenities with easy access to main thoroughfares or public transport – will continue to sell, he believes.
Fourways and Broadacres in Sandton are growing in popularity at the moment, as it offers easy access to excellent amenities in a high-worth area. There are a number of options for between R650 000 and R900 000, with many being in secure, modern complexes with some even having low-maintenance private gardens.
In the Roodepoort/Randburg area, Lew Geffen Sotheby’s International Realty’s principal, Kobus Odendaal, has seen a significant increase in not only enquiries but also sales since lockdown began, especially at the entry level with properties under R1.5 million being snapped up. Most popular is North Riding where they have closed the most deals.
Since lockdown their concluded sales have been in excess of R40 million with another R30 million in pending sales which have suspensive conditions to be met.
The group’s agents in Cape Town’s Southern Suburbs are reporting very promising activity in some of their areas. There is still considerable interest in well-priced freehold properties in the area and entry level buyers are snapping up good deals.
Agent Marc Plastow, for example, listed a house in Harfield Village at the beginning of June for R1.895 million, had enquiries from eight interested buyers on the very first day, and received an offer that same day.
He is also fielding a number of enquiries for property in neighbouring Kenilworth Park and near Kenilworth centre.
The group’s sectional title specialist, Dave Burger, says that during lockdown he has received 30% more enquiries for property in Mowbray and Rosebank than in Rondebosch or Newlands. In both areas one can buy a renovated one-bedroomed apartment for under R1 million, for example.
Severe lack of affordable housing
In the Cape Town Municipality, the housing backlog currently exceeds 300 000 homes and James Wilson, CEO of the Amdec Group, says the South African Government has struggled to deliver sufficient affordable housing, emphasising the need for greater collaboration between the public and private sectors.
The Amdec Group is one of SA’s largest privately-owned property investment and development companies. For example, it’s planned Harbour Arch development could see an injection of R15 billion into the Cape Town CBD and could creating and estimated 20 000 jobs during the construction phase alone.
However, bringing a project of this scale to market is a costly, time-consuming, and risky process, Wilson points out. Private developers have to contend with many groups of objectors who, in his view, don’t always appreciate the commercial realities of developing on this scale.
“If local Government is serious about creating jobs, it needs to eliminate the barriers and bureaucracy, become business-friendly, and expedite the delivery of developments that will provide job opportunities on a large scale,” said Wilson.
The Amdec Group has recently announced their intention to develop Golden Grove Estate, a new R500 million affordable housing estate in Ottery, Cape Town.
This 11-hectare site, situated in an established residential area, will introduce one thousand affordable residential apartments, along with a convenience retail centre, communal gardens, children’s playgrounds, a creche and day-care facilities, 5-a-side soccer pitches and basketball courts, and a communal recreational clubhouse for all the residents.
“We are acutely aware of the need for affordable housing and are delighted that our recent planning application in respect of Golden Grove Estate has been approved by the Municipal Planning Tribunal. We intend launching this scheme to market simultaneously with Harbour Arch and hope to start construction before the end of the year,” said Wilson.
“Multiple private developers have the capacity – and the desire – to assist in alleviating the affordable housing shortage. But without collaborative relationships with local municipal authorities, there is often insufficient motivation to do so.”
He says affordable housing schemes are frequently not commercially viable. Homes need to be subsidised in order to stay within the affordable price bracket, which means that developers are often not incentivised to bring affordable homes to market. Many local property developers are, therefore, now investing offshore.
Breaking the rules
Western Cape Minister of Human Settlements, Tertuis Simmers announced this week that he is deeply concerned at increased reports from various stakeholders about residents who have received a fully subsidised home from government, but who have either rented or sold the property.
“I regard the action of anyone that embarks on this route as unethical, as they’re denying one of the almost 600 000 people that are currently on the Western Cape Housing Demand Database, a housing opportunity, and their families who in the future could benefit from this asset,” Simmers said in a statement. A fully subsidised house costs the state close to R500 000.
His department is currently investigating all the reports and intend to take the necessary action once a conclusion is reached.
