Residential building data from StatsSA for July pointed to moderate year-on-year growth in new planning activity. For the three months to July 2022, the national growth rate in residential unit building plans passed was 13.76% year-on-year.
“This growth has pleasantly surprised,” said John Loos, property sector strategist at FNB Commercial Property Finance. Given the Reserve Bank’s steady interest rate hiking from late 2021, “we had expected some slowdown in planning activity by now,” he said.
And delving into the provincial breakdowns, the data shows that two of the three major provinces are exhibiting signs of a slowdown. Gauteng showed a 17.8% year-on-year decline for the three months to July 2022, while KwaZulu Natal was up a mere 1%.
The Western Cape appears largely responsible for the positive national growth rate in residential plans passed, said Loos. “This province continues to produce signs of significant outperformance, with its number of units’ residential plans passed growing by a very strong 50.76% year-on-year for the three months to July.”
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“This strong growth is leading to the increasing likelihood that the Western Cape’s annual building plans passed for 2022 may exceed those of Gauteng for the first time in recorded history. This is significant, because Gauteng is still by far the largest provincial economy as well as the province with the largest population,” the property expert said.
In the year to July, the Western Cape’s number of units’ residential building plans passed accounted for 37.3% of the national total, above Gauteng (28.2%), and KZN (14.3%).
The relative picture was similar for residential buildings completed, Western Cape having 46.7% of the national share in terms of the number of units, Gauteng – 30.3%, and KZN – 9.8%.
“The Western Cape’s meteoric rise in share of plans passed and completions isn’t the only trend that catches the eye,” said Loos.
The drop in Gauteng’s share is also a key feature in recent years. In 2019, Gauteng’s share of plans passed accounted for 48.5% of total plans completed and for 55.7% just prior to this significant multi-year decline.
“Years of building a popular “brand” as a lifestyle and well-run region appears to be increasingly paying off for the Western Cape economy and property market,” said Loos.
“While one cannot rule out reporting issues affecting data, we believe that this shift in the relative share of the development market moves away from Gauteng towards the Western Cape and to a lesser degree, KZN points towards a longer-term “economy shift” towards the coastal regions.”
Loos said that for over two decades, FNB has noticed a mounting “net semigration” trend of skilled and higher income households, most notably in the direction of the Western Cape, but also to certain KZN coastal regions.
“This has led to the expectation that the Western Cape economy would at some point begin to outperform the rest, because SA’s modern services-dominated economy is heavily dependent on skilled labour, and the Western Cape is best at attracting and retaining these.”
On top of this, skilled migrants bring significant purchasing power to the region, he said.
“So, the relatively strong residential planning and completions activity is likely far more than just the demand for homes from a recent surge in semigrants into the region. More likely is that the region’s economy is beginning to outperform the rest, and that this is driving it towards a larger housing development market as job and income growth in the province begins to outperform the other provinces,” said Loos.
Simultaneously, the data may point to an increasingly troubled Gauteng economy, a greater skills exodus there having the opposite impact on its economy, he said.
The Q2 ’22 Oobarometer statistics published by home financial experts, Ooba Group, show lower than expected home price inflation from the last quarter – resulting in property becoming more affordable in certain regions, enabling homebuyers to put down larger deposits.
“It’s interesting to compare buying behaviour across the various regions and to identify areas where homebuyers are prioritising deposits. Deposits are a great way to reduce the size of their monthly and total home loan repayments and to negotiate a better interest rate from the banks,” said Jackie Smith, head of Buyers Trust, a subsidiary of Ooba Group.
“While the Oobarometer only observed a 0.4% growth in the price of property quarter-on-quarter, the average size of deposits experienced a 16.4% increase. We also observed that in many regions, the average deposit size was significantly higher than the national average of 7.8%,” said Smith.
Ooba’s average purchase price of R1,431,712 in Q2 2022 showed muted growth of 1.8% from R1,407,071 in the second quarter of 2021.
The group’s data shows that the average approved bond size of R1,320,225 was up 2.4% year on year. The average approved bond size for first-time buyers grew by 4.4% to R1,056,574 in Q2 2022.
“In the Western Cape, which is currently the region experiencing the most homebuying activity, the average deposit size is a whopping 17%. This could be attributed to increased semigration and the scarcity of property supply in the region, resulting in homebuyers needing to put down a larger deposit to secure their dream home,” said Smith.
|Province||Average price||Average deposit||% of price|
|Western Cape||R1 878 701||R315 470||17%|
|Northern Cape||R1 406 818||R158 787||11%|
|Mpumalanga||R1 125 834||R91 524||8%|
|KwaZulu Natal||R1 342 494||R154 761||13%|
|Limpopo and Polokwane||R1 406 818||R158 787||11%|
|Gauteng South and East Rand||R1 136 767||R108 408||9%|
|Gauteng North and West||R1 629 511||R164 431||11%|
|Free State||R1 010 647||R86 357||8%|
|Eastern Cape||R1 422 213||R204 625||14%|
Read: Average house price in South Africa vs 15 years ago