The luxury property market in Cape Town is experiencing a notable surge, driven by a significant reduction in stock levels. This shortage is placing upward pressure on prices, according to Dr Andrew Golding, chief executive of the Pam Golding Property Group
He said the luxury end of the market has seen remarkable strength and significant reduction in stock levels, which is driving a shortage of stock and in turn placing pressure on pricing.
Confidence has returned to the property market in this segment as it is driven by positive sentiment in respect of the improved financial conditions, local stock markets and stable government.
In Cape Town, the luxury market is facing substantial stock shortages, leading to increased pricing pressure. Pam Golding Properties has reported several high-value sales in the R20 million-plus bracket.
Notable transactions include a house in Clifton sold for R66 million to a businessman from Gauteng, a Camps Bay house sold for R33.8 million to a Gauteng-based company, and an apartment in Mouille Point sold for R27 million to a local buyer from the Western Cape.
“In sought-after Constantia Upper in Cape Town’s Southern Suburbs, we have concluded notable sales of homes for R54 million, R45.5 million and R26 million, among others,” said Golding.
The Boland and Overberg regions have also seen successful sales of homes priced over R20 million, particularly in areas like Somerset West, Paarl, Hermanus, and Durbanville.
The planned redevelopment and expansion of the Cape Winelands Airport into an international commercial airport by 2027, along with road infrastructure upgrades, are expected to significantly benefit these regions.
The extension of the R300 from the N1 to the urban edge north of Wellington Road in Durbanville will form a ring road around the Cape metropole, accommodating increasing traffic volumes.
Emerging Trends in the First-Time Buyer Market
The lower end of the market, including first-time home buyers, is currently sensitive to higher interest rates and increased living costs. However, there are signs of recovery as confidence grows that interest rates will soon decrease. Banks remain supportive, offering a competitive average weighted concession at -0.56% and a record national loan-to-value ratio of 93.7% in July.
“According to ooba, national applications for first-time buyers rose to 46.6% in July 2024, rebounding from a subdued 44.3% in June, with demand likely to improve further later this year. This anticipated rebound in first-time buyers is likely to see stronger demand for homes around the R1 million mark in urban nodes, which typically means sectional title properties,” said Dr Golding.
Mortgage applications from self-employed individuals reached a record 13.3% in Q2 2024, and cash sales soared to a record 60.2% in the same period. The recent surge in local cash buyers has led to increased demand for investment properties, particularly in the Western Cape.
Outlook for 2025
Looking ahead, Dr Golding is optimistic about the housing market’s prospects. There are growing expectations that the GDP growth rate in 2025 may exceed expectations, which will support the housing market.
“The lower price bands have been the most resilient during the slowdown, so it would seem likely that the higher price bands perform better going into the recovery – in part because improved confidence, lower interest rates and stronger growth will see less financial pressure on homeowners to downscale and may see people who were renting (possibly as the result of relocating) commit to purchasing a home,” Golding said.
He also noted that more efficient local governments, resulting from the GNU, could trigger recoveries in housing markets previously affected by poor service delivery. Johannesburg’s housing market, in particular, could see a slowdown in the current semigration trend to the Western Cape.
“We anticipate that activity will increase towards year-end as the anticipated rate cuts materialise, boosting market sentiment in general, which will underpin the emerging recovery in house price inflation,” concluded Dr Golding.
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