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Residential living trends in South Africa |
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Extracts from Residential living trends in South Africa
Absa Group Limited 1 Residential Property Perspective – 2q 2006
http://www.finforum.co.za/absa/property_prices.html
An analysis of living trends set out in this article will prove a useful input in making investment decisions, covering aspects such as factors influencing residential living trends and also the impact that this has had on residential living trends.
The factors influencing residential living trends Economic conditions:
The country recorded an improved economic performance during 2000 to 2005, with growth in real gross domestic product (GDP) averaging 3,8% per annum over this period. Inflation declined to its lowest level since the 1960s, resulting in interest rates dropping to levels not seen during the past 25 years. Growth in real household disposable income averaged 4,4% per annum in 2000 to 2005. This was the strongest growth ever recorded in household income for a period of this duration.
During the period 200-2005 growth in Gross Domestic product (GDP) averaged at 3.8%
Fiscal policy:
Transfer duty on property has been cut for five consecutive years since 2002/03. These fiscal policy related measures,
especially the cuts in transfer duty, were largely focused on the lower- and middle-income groups in the country.
These measures represented an effort from government to make housing more affordable.
Demography:
rapidly growing middle class with a strong culture of home-ownership, caused the demand for housing from people in this category to increase sharply. A bigger focus on property investment, as a result of the strong demand for middle-class housing from this segment of the population, as well as the fact that especially the equity market underperformed during
most of 1998 to 2003, contributed to an overall higher demand for residential property.
Another demographic factor affecting housing and living trends is the tendency for people to live longer than they did many
years back, while the life expectancy of people who have a low risk exposure to HIV/Aids has also increased. This resulted in a bigger demand for accommodation in old age homes and retirement villages. Against the background of these demographic developments, the supply of housing struggled to keep up with demand, contributing to higher property prices.
Availability of land for residential development:
Specifically rapidly growing urban areas in the country are experiencing increasing shortages of suitable and properly serviced land for residential purposes. This caused a sharp rise in land prices over the past few years
Transport infrastructure
Public transport systems are not up to standard, nor geared to effectively transport increasing numbers of commuters daily. These factors have resulted in a rapid rise in travelling times, and a stronger demand for residential properties close to business nodes.
Affordability of housing:
In view of favourable economic conditions and a strong demand for residential property in South Africa, house prices increased sharply in 2000 to 2005, whereas growth in income levels lagged behind. The result was that the house price-toremuneration ratio increased rapidly during this period.
Lifestyle Changes:
The impact of the factors driving residential living trends
Certainly one of the most obvious changes in residential living trends in South Africa in recent years is that a large number of people have opted to live in residential developments and estates where they can enjoy a lifestyle that would not have been possible under normal conditions. However, local authorities increasingly require that residential developments, in some instances also lifestyle estates, make provision for both low-cost and upmarket housing.
Golf estates,
in particular, have become extremely popular
in South Africa in recent years. It is estimated that there are currently at least 45 completed golf estates in the country, consisting of around 20 000 stands in total. A further 30 golf estates are in various stages of construction and around 32 are proposed and awaiting final approval. As a result, the final approval of many proposed new golf estates, many of which are near sensitive coastal areas and nature reserves, especially in the Western Cape, currently hangs in the balance. If these and other lifestyle estate developments are not eventually approved by the government, estate living in South Africa will become even more exclusive, which will push up property prices in these areas even more. Another type of residential living that is becoming increasingly popular, especially in the Western Cape, is
Wine estate developments
People can buy residential property on these estates and be involved in active wine production, becoming part of an operating wine farm. A good example of such a development is the recent selling of parts of the historical Boschendal wine estate near Stellenbosch to private investors.
High rise apartment blocks
..however, in recent times, high-rise luxury apartments in upmarket areas such as Sandton, Johannesburg, have been developed, mainly because people want to live near their place of work and major shopping centres to avoid traffic congestion, but still want to live in an upmarket area. High-rise luxury residential apartments have also become a trend in popular holiday destinations such as the Strand on the False Bay coast in the Western Cape, and Umhlanga Rocks on the KwaZulu-Natal north coast.
Inner-city residential developments:
The rejuvenation of inner-city areas picked up momentum some time ago in places such as the Cape Town city bowl (largely
driven by the highly successful Victoria & Alfred Waterfront development) and the Durban central business district (only about 5 kilometres In Durban about 2 500 upmarket residential units are expected to come on stream as a result of the Durban Point development.
Residential” or “condominium” hotels
A new development regarding inner-city residential living is the introduction of “residential” or “condominium” hotels. This concept, which will include facilities such as gymnasiums and restaurants, will be introduced to the Johannesburg inner city later this year. It allows individual investors to place their five star apartments in a short-term rental pool or put them up for a long-term contract. According to Urban Hip Hotels, which will belaunching and managing the concept, the combination of short-term hotel occupancy and long-stay rentals has the potential of a significantly better return than a typical long-term contract for a luxury apartment in a residential complex. Having people living in these hotels on a permanent basis will serve as a catalyst for other property developments, especially in the commercial segment.
Coastal and rural properties:
prices have increased sharply along the coast and in rural towns as a result of the higher demand. In the coastal provinces of the Western Cape, Eastern Cape and KwaZulu-Natal, demand and supply conditions for coastal property have, in some cases,
pushed prices in all segments of the market to not far below, or even higher than the level of prices in metropolitan areas.
Single-stand residential properties:
This type of residential property was the norm in South Africa for many years. Although the trend in respect of residential
living, especially in the urban areas, has shifted towards security villages and complexes for various reasons, single-stand properties are still popular with people having young children, for example. Upmarket lifestyle estates and complexes also favour this type of accommodation, but normally all houses in these developments have to conform to a uniform style,
such as Tuscan, Balinese or Victorian. |
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