Since the May elections and the formation of the Government of National Unity (GNU) in early June, the Johannesburg real estate market has seen a significant influx of capital. Chas Everitt reports that billions of rands have flowed into the market since the start of 2024.
Rory O’Hagan, principal of Chas Everitt Hyde Park and Sandton, noted over R800 million in home sales in Johannesburg’s northern suburbs in the past seven months. He observed increased property demand across Gauteng since the beginning of the year.
The Absa Homeowner Sentiment Index (HSI) supports this trend, showing a rise in confidence in the Gauteng property market from 64% in Q2 2023 to 72% in Q2 2024.
O’Hagan attributes this boost to the GNU, which has attracted both local and foreign investors, increasing their office’s monthly sales from R100 million earlier in the year to over R150 million in June and July.
Business confidence also began to recover in June and July after a sharp decline leading up to the elections.
Berry Everitt, the CEO of the Chas Everitt International property group, said that supply and demand and property prices are influenced by several factors:
Consumer and business confidence in a certain area
New infrastructure developments or capital projects
Major economic and weather events
The performance of local government
These factors can have either a negative or positive impact.
A good example of this is what happened in the Western Cape following a 2021 surge in semigration from Gauteng that was driven by a combination of the Covid-19 pandemic, a rise in remote working and very low interest rates.
This created a very strong sellers' market in the region, which was then given further impetus by good governance compared to other provinces and by a lack of new housing development, which meant a dwindling supply of homes for sale relative to high demand.
And that resulted in prices in the Cape Town metro rising much more rapidly over the past five years than in the Johannesburg metro or eThekwini, the other two biggest SA markets in terms of the number of home sales.
Indeed, according to the latest Residential Property Price Index (RPPI) from StatsSA, prices in Cape Town have risen by an average of almost 28% since 2019, while those in Johannesburg have only risen by around 9% - making it the worst performing metro in this period.
What is more, Johannesburg prices have actually shown a decline of around 1.5% over the past 12 months, compared to Cape Town's rise of almost 6%, noted the chief executive.
"The effect of this is evident in the latest available Lightstone figures, which show that while Gauteng currently accounts for 35% of all residential sales in SA, it accounts for only 37% of the value of those transactions.
The Western Cape accounts for only 18% of sales but 30% of the total value of sales, and KZN accounts for 13% of sales and 13% of the value of sales.
"However, this also means that those thinking of buying in Johannesburg currently have an opportunity to acquire homes and investment properties that in real terms are at or even below 2018 or 2019 prices," he said.
There is also a lot of inventory to choose from, which makes this metro a piping hot buyers' market, where the only thing keeping a lid on sales right now is high interest rates.
This is underlined in the latest Absa Homeowner Sentiment Index (HSI), which shows that overall confidence in the Gauteng property market rose rapidly from 64% in the second quarter of 2023 to 72% in the same period of this year.
Strong buying activity and price increases can be expected as soon as interest rates start to fall, making it easier and more affordable to obtain home loans.
Everitt said that those planning a purchase in Cape Town might want to wait a while.
High inflation, rising prices and higher interest rates since 2022 have made it increasingly difficult for buyers to afford homes in Cape Town.
"Demand has tailed off accordingly, the rate of price growth has started to slow down and the market there is no longer all in favour of sellers - but it is definitely also not a buyers' market and will only become more accessible when interest rates decline meaningfully."
He said that eThekwini did not benefit from the Covid-driven flight to the coast in the same way as Cape Town did, and the reason is the very negative sentiment created in that market by the 2021 riots in KZN and the disastrous floods of 2022.
This is reflected in the fact that while prices in this metro have shown an average growth of 16% since 2019, they are currently also in negative territory, having declined by 1% over the past 12 months.
"The eThekwini market is thus another one that buyers should be looking at right now, along with Nelson Mandela Bay, where prices have grown by an average of 28% over the past five years but stalled and then also started to decline over the past 12 months."
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