It’s boom time in the Western Cape as prospective homeowners stream in from other provinces

20 Dec 2022

Middle-class homeowners are selling up in Gauteng and thronging to the coast, triggering a building boom in the Western Cape.

On 15 December, Statistics South Africa (Stats SA) published its latest building statistics for the private sector, revealing that the value of recorded building plans passed — at current prices — increased by 7.9% (R7.114-billion) from January to October 2022 compared with the same period in 2021.

Increases were recorded for additions and alterations (12.5% or R3.107-billion), non-residential buildings (7.6% or R1.164-billion) and residential buildings (5.7% or R2.842-billion).

Stats SA conducts a monthly building statistics survey collecting information on building plans passed and buildings completed — financed by the private sector — from the largest local government institutions in South Africa.

The value of the completed buildings increased by 14.5% (R7.142-billion) during the period under review, compared with January to October 2021.

Increases were recorded for additions and alterations (21.8% or R2.522-billion), non-residential buildings (12.5% or R1.417-billion) and residential buildings (12.2% or R3.204-billion). These exclude low-cost housing projects, as data on subsidised housing is obtained from the Department of Human Settlements.

The largest contributions to the total increase of 7.9% were from the Western Cape (contributing 6.8 percentage points) and Mpumalanga (contributing 1.4 percentage points).

Six provinces reported year-on-year increases in the value of buildings, with the Western Cape (contributing 10.1 percentage points), KwaZulu-Natal (3.3 percentage points) and Gauteng (1.2 percentage points) being the largest contributors.

‘Golden economic era’

Judging by the increase in residential building activity in the province, the Western Cape is moving into a “golden economic era”, says FNB property strategist John Loos.

Relatively high levels of Western Cape residential building activity are not just about a “semigrant” demand for homes; they suggest a regional economy that may be moving into a period of significant outperformance economically, compared with the rest of the country, driven by decades of superior skilled labour attraction and retention.

But Loos says though it may be tempting to attribute the strong levels of residential building planning and activity in the Western Cape to the strong wave of semigration by the middle- and upper-income groups, it seems that building plans passed in the province are exceeding those of Gauteng.

“Its strong building planning levels are not just about recent inflows of semigrants needing houses. It is about a process that started over two decades ago,” Loos says.

Last month, the Stats SA residential building statistics release for September pointed to a national year-on-year decline in new planning activity in Q3, after a Q2 period of good positive growth. Loos says on a provincial basis, there are wide divergences, most notably the Western Cape significantly outperforming Gauteng and KwaZulu-Natal.

“This outperformance is so significant that the Western Cape appears on track to have the largest share of residential building activity of the nine provinces for the first time in its recorded history.”

However, Loos notes that owing to data volatility, they use a three-month moving average to smooth the data, and for the three months to September 2022, the national growth rate in residential units’ building plans passed was down 21.88% year on year, which is not surprising given the fact that rising interest rates and a slowing economy have been dampening national housing demand.

Visit Daily Maverick’s home page for more news, analysis and investigations

Earlier this year, Hayley Ivins Downes, head of digital at Lightstone, a property market intelligence agency, told the Real Estate Industry Summit that movement to and from small towns like Margate, Mossel Bay, Milnerton and Jeffreys Bay was on the increase; that residents were downgrading as opposed to upgrading; and that middle-class homeowners tended to prefer buying in estates in the R1-million to R3-million market.

“Covid affected house prices in different ways — and it was luxury pricing that fell the most, although it has recovered strongly. Low-, mid- and high-value homes are also recovering and the overall market is moving in the upward direction.”

She said the trend of moving to places like Cape Town can mostly be attributed to the desire for a slower, safer and better-quality lifestyle.

“Semigrants are also attracted to the fact that municipalities are typically better run in the Western Cape than in other parts of the country.”

Estate agencies agree that Cape Town is the most popular semigration destination for buyers, who cite service delivery, a coastal lifestyle, and some of the best schools and universities in the country.

Buyers are often prepared to sacrifice size and space because property prices are about 20% higher in the Cape compared with the rest of the country, says Pieter Jordaan, licensee for Seeff in George.

“With Stellenbosch University and top schools such as Paarl Boys, Paarl Gimnasium and Paul Roos, and a host of lifestyle and golf estates to choose from, these areas have become a top choice for many buyers, including the wealthy,” Jordaan says, noting that Hermanus and Langebaan were popular with older buyers, farmers and people who were commuting from Cape Town.

Gauteng is also seeing a mini-migration, with the eastern parts of Pretoria offering a better lifestyle, security and access to excellent schools and the University of Pretoria. DM168

Categories:

Tags:

DM is much better if you are signed in...

Business Maverick

‘Golden economic era’