Since coming off the boom of the mid-2000s, housing market activity appears to have settled into a “new normal”. So says Steven Barker, head of home loans at Standard Bank who notes that while building activity has slowed compared to levels seen in the mid-2000s, current activity remains dominant in Gauteng, followed by the Western Cape, KwaZulu-Natal and the Eastern Cape.
Barker bases his views on Standard Bank’s recently published Residential Property Viewpoint (RPV) which shows that almost half the flats and townhouses built in South Africa between 2001 and 2011 were erected in Gauteng, which saw net inward migration soar to over one million people over that period. Gauteng also has the highest population density in the country with approximately 675 people per square kilometre, compared to a national average of 43 people per square km.
“As the economic hub of South Africa, migration to Gauteng is to be expected but the past decade has shown an above average increase in building activity in the province,” notes Barker.
Gauteng also leads South Africa in terms of new property registrations with about a third of all freehold listings in South Africa last year occurring in the province, compared to just over 20 percent for the Western Cape. The Standard Bank property data indicates that approximately 60 percent of freehold registrations last year were for purchase prices below R500 000 and about a fifth for properties valued between R500 000 and R1m. This compares to about 80 percent of registrations for properties priced below R500 000 in 2003, which is indicative of the rise in property prices across all price bands over the last decade.
South Africa’s economic hub also accounted for approximately half of all sectional title registrations over the last decade. That said, deeds office data shows that registrations of sectional title properties in South Africa have dropped from a peak of approximately 110 000 units in 2007 to just below 60 000 in 2012, taking its cue from the overall moderating market.
The RPV reveals that the one area where Gauteng does not lead other provinces is in flat rental inflation. The province mustered rental inflation of just 4.6 percent year-on-year as of July 2013, below the national average of 4.9 percent and lower than the Western Cape and KwaZulu-Natal which saw rents increase 4.9 percent and 5.0 percent respectively over that period.
“It appears that the steady stream of new residential developments in Gauteng is having a cooling effect on rental inflation compared to other provinces in South Africa, which don’t experience as much building activity”.
Interestingly, the Free State leads the stakes in terms of home ownership with almost two thirds of households in the province residing in homes under various stages of ownership. Although South Africans are displaying an increasing propensity to rent according to the latest Standard Bank data (approximately 25 percent of households), the majority of citizens continue to favour home ownership. Gauteng has the highest appetite for rental accommodation with 37 percent of households in the province opting to rent.
Despite being the economic heartbeat of South Africa, Gauteng fares poorly in terms of rental obligations being settled on time. Data from credit bureau TPN reveals that just 67 percent of tenants in Gauteng settled their rental obligations on time in the first quarter of 2013, just behind KwaZulu-Natal at 69 percent and below the national average of 71 percent. The Western Cape boasts the highest percentage of tenants settling their obligations on time at 78 percent. TPN reports that the Limpopo province comes in below the national average with 67 percent, while the Eastern Cape and Mpumalanga pip the national average with 76 percent.
From a price bracket perspective, rentals of between R3 000 p/m and R12 000 p/m were the best performers in the first quarter of this year, with an average of 71 percent of tenants setting their obligations on time. For rentals above R25 000 per month, only 51 percent of tenants settled their obligations on time and almost a quarter made only partial payments.