Ray Mahlaka
4 minute read
6 Nov 2017
1:26 pm

Is semigration to the Western Cape slowing?

Ray Mahlaka

There are already signs that the migration of Joburgers and Durbanites into the Western Cape, which has led to a rapid rise in house prices for many years, might be slowing down.

The frantic migration of up-country home buyers into the Western Cape over the last six years has been the hallmark of surging house prices in the region.

However, there are early indications that the migration of buyers (notably from Gauteng) into the Western Cape – known as the “semigration” trend – is starting to slow down.

Latest research from FNB points to a decline in the net inflow of repeat home buyers into the Western Cape. Net inflows refer to repeat home buyers migrating to the Western Cape excluding those migrating outwards to other provinces. Net inflows have declined mildly to 12.8% so far this year from 15.7% recorded in 2016 – the highest rate since 1999 (see graph below).



Speaking at a housing market forecast event by credit bureau Tenant Profile Network on Thursday, FNB property strategist John Loos said it might be too early to draw conclusions about whether the decline is the new normal for the Western Cape.

The decline in buyers migrating to the Western Cape might be driven by a number of factors: severe drought conditions that have resulted in water shortages and home buyers that are ditching the region in search for value-for-money elsewhere.

Loos said there might be a drop in the Western Cape’s migration figures in 2018 due to unaffordable house prices and the region’s economy that is under more pressure from drought conditions.

Read: Here’s how Cape Town property prices have exploded

Other industry players have also noticed a decline in the pace of migration. “There has been a bit of slowdown in buyers from up-country purchasing properties. Buyers are waiting to see what is happening with the drought,” said Kevin Jacobs, a broker at RE/MAX Premier in Cape Town’s Claremont area.

Jacobs said family-orientated southern suburbs like Rondebosch, Claremont, Plumstead and Wynberg – with properties priced between R2.5 million and R3 million – are still seeing demand from “semigrants” as these areas tend to be relatively affordable compared with the Cape Town City Bowl. “Although there has been a small percentage reduction in up-country buyers, properties in the market are still taken up by locals.”

Ian Slot, MD of Seeff Atlantic Seaboard, said buyers might also be putting their migration and buying decisions into the Western Cape on hold pending the outcome of the ANC December elective conference, which would be a defining event for SA’s political and economic trajectory.

“I see the desire for buyers to move to the Western Cape remaining where it is – if not increasing. The actual move will depend on people’s financial means and ability to sell their property in Johannesburg or KwaZulu-Natal and fund their lifestyle in Cape Town,” said Slot.

Outperforming rest of SA

Over the last five years, Western Cape house prices have grown by 53.7% (on a cumulative basis) compared with KZN’s 30.2%, the Eastern Cape’s 26.6%, and Gauteng’s 24.7%, according to FNB.

House prices have benefited from the continued “semigration” trend of property buyers from Johannesburg, Tshwane and KZN relocating to the Western Cape – particularly in Cape Town. The perception that the Mother City is the best-run metro in terms of service delivery, offers a live/work/play offering and has good government-run schools is a drawcard for many.

Also, the limited supply of properties – largely due to land scarcity in the region as an ocean, mountain, farmland, and conservation areas limit housing developments – has fuelled stronger house prices.

Existing homeowners have benefited from a steep rise in the capital appreciation of their homes. However, rising house prices have made it difficult for middle-income and first-time homebuyers to afford humble abodes.

Underscoring this is that first-time homebuyers as a percentage of total buying reached 8.02% in Cape Town during the year to 2017, compared with Johannesburg’s 28.62% and Tshwane’s 24.3% (FNB figures) over the same period.

Read: CT house prices: Booming, a bubble or just strong?

This comes as little surprise given the wide house price and affordability gap between Cape Town and other cities across SA. For example, buyers will now shell out R1.4 million for an average house in Cape Town compared with R1 million in Johannesburg and Durban for a similar sized property, according to FNB.

More encouraging is that Western Cape house prices are starting to taper, said Loos. For the second time this year, house prices fell to 4.3% in the third quarter of 2017 – significantly lower than the highs of 11.1% recorded in the first quarter of 2016. “Slowing house prices is a good thing as people might finally be able to afford to get into the housing market.”

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