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Cape Town house prices slow amid water crunch 

As Day Zero fast approaches, property prices in the Mother City are beginning to decline as up-country buyers retreat.

Cape Town homeowners are facing a double whammy: the threat of taps running dry due to the water crisis and slowing house prices.

Rising house prices and the exclusion of first-time home buyers from the housing market because of affordability issues have been the hallmark of Cape Town’s five-year-long residential property boom.

Homeowners in the Western Cape have enjoyed a 50.4% increase in the value of their properties over the last five years to December 2017, compared with 31.9% for KwaZulu-Natal and 21.9% for Gauteng over the same period, according to latest figures from FNB.

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 has been the reason behind rising house prices.

House prices have also benefited from the continued “semigration” trend of property buyers from Johannesburg, Tshwane and KwaZulu-Natal relocating to the Western Cape – particularly Cape Town, in search for a more relaxed lifestyle.

However, the water crisis and fast-approaching Day Zero in Cape Town is starting to impact house prices and desire of up-country buyers to relocate.

The City of Cape Town has warned that water supply to households would be shut as early as April 12 (known as Day Zero) if Capetonians are not diligent in their water-saving efforts. Day Zero will see residents forced to queue at about 200 water collection points for their allocated 25 litres of water per day.

Although Cape Town house prices are still beating inflation, they slowed to 9.7% in the fourth quarter of 2017 from highs of 15% in the first quarter of 2016, according to figures from Standard Bank Group. “Although it would be difficult to separate and quantify the reasons for this easing growth, the Cape Town water crisis will have exacerbated it,” economist at Standard Bank Siphamandla Mkhwanazi said in a note.

There might be more pressures on Cape Town house prices, Mkhwanazi warned, as the drought led to agricultural losses, which might further depress household income growth in the Western Cape.

“Also, the drought and government’s slow response will affect consumer sentiment negatively; demand for property is therefore expected to suffer and, ultimately, further dampen house price inflation,” he said.

Figures from FNB property strategist John Loos also point to a similar trend in which prices in the Western Cape as a whole have already dropped. In the fourth quarter of 2017, Western Cape house prices slowed to 4.4% compared with 4.8% in the previous quarter. Gauteng, KwaZulu-Natal and the Eastern Cape recorded growth, except the Western Cape (see below).

Source: FNB

Rising Western Cape house prices have made affordability difficult for middle-income and first-time home buyers and declining prices will help in that regard. “Slowing house prices is a good thing as people might finally be able to afford to get into the housing market,” said Loos.

Slower ‘semigration’

As the water crisis continues, the allure of moving to SA’s tourism jewel and the “semigration” trend is starting to diminish. 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% in November 2017 from 15.7% recorded in 2016 – the highest rate since 1999 (see graph below).

Loos said the decline in buyers migrating to the Western Cape might be driven by the water crisis and home buyers that are ditching the region in search of value-for-money (and water) elsewhere.

Kevin Jacobs, a broker at RE/MAX Premier in Cape Town’s Claremont area, has also seen a noticeable change in up-country buyers flocking to the Western Cape.

“We are still seeing buyers from Port Elizabeth, Durban and Johannesburg looking for properties in Cape Town. But many buyers are cautious and are taking a wait-and-see approach about how the water shortages are dealt with before they purchase,” said Jacobs.

Samuel Seeff, chairman of the Seeff Property Group, agreed with Jacobs adding that the water crisis was less likely to have an impact on the mid-market with properties valued between R1 million up to R4 million. “The mid-market tends to have buyers or sellers who need to buy or sell for a variety of reasons whereas the upper end of the market can wait to see how the water crisis unfolds,” said Seeff.

The upper-end property market – where sales upwards of R150 million in Sea Point, Fresnaye, Clifton, Bantry Bay, and Camps Bay have become the norm – has been hit the hardest due to water shortages. Lance Cohen, Seeff’s Atlantic Seaboard luxury market specialist, said buyers in the luxury market are hesitant to buy properties “unless they have to or find a good price”.

The DA, which controls the Cape Town, hasn’t covered itself in glory. At a time when the political party should be addressing the problem facing the city, it has been preoccupied with internal squabbles and the dismissal of mayor Patricia de Lille.

The big question is whether the decline in property prices, demand and migration of up-country buyers will be a sustained trend. Richard Day, Pam Golding Properties Cape regional head, said it depends on how the water crisis is handled.

“If effectively managed and contained for a few months, it will not impact the long-term desirability of living in Cape Town. But a prolonged water crisis would inevitably impact sentiment and could affect property prices until the situation normalises,” said Day.

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About time, too. Property prices in Cape Town are ridiculous.

Indeed, a bog standard 3 bed house in an older middle class area, R3.3m. Not even an empty swimming pool for the kids to skateboard in.

Will people need to queue every day for their quota of water? How will one go to work AND queue for hours to get water, EVERY DAY?
As per a recent article I read there will be 200 water collection points. Will this service the entire Cape Town metro of 3.7M people?? That is on average 18500 people per collection point. Assuming it takes 90sec to fill a 25 litre can…the people will queue for up to 462hours??? This is a problem as a day is only 24 hours! Even is it is only for Cape Town itself (+- 500,000 people) that implies a queuing time of 54hours per day?

I don’t think there are enough collection points in Cape Town for Day Zero!

They say that at each collection point there will be from 70 to 600 taps.

Good time to buy!

No, not yet.

Wait for Zille Twit to be put out to pasture in 2019 and being replaced by someone more representative of the masses.

Also wait for next year’s elections where DA will either be voted out or be forced into a coalition with ANC/ACDP etc

Then you will see all the Goldrush Semigrant pillocks packing their bags and selling en masse.

It’s gonna be a fire-sale of note

Also stock up with lots of popcorn as the DA implodes with more scandals of corruption and incompetence…

LOL, rfjock – you comments are telling wrt Cape Town. Between you and your mate in Sydney 🙂 You are one of those individuals who would be quite comfortable with the proverbial hitting the fan just to be able to put up your hand and say, I told you so. Cape Town envy just oozes from most of your anti CT rants, LOL, almost like a lover scorned. No dayzero here buddy, yeah, times are tight, but we will get through this and come out a dam(n) side stronger. Meanwhile, you will still be staying in your *hithole up north.

Not sure whether any real estate agent wld give a truthful answer to a question on real estate prices – after all their future wealth depends on ever increasing prices. However the other point not mentioned is the “qualifity” of the Bollywood mansions coming to the market. In weekend property Argus there were TWO original cape Dutch homes located in Constantia – one of which was built 150 yrs ago – advertised in the R10m – R15m price. This is for nothing!!! Yes something has stirred in w Cape – methinks the rats are deserting!

The City Manager resigned two weeks ago, so yes the rats are jumping off this sinking ship.

The DA has placed a 30 year old ex-PAC speechwriter (Xanthea Limberg) as co-head of the water disaster management, and Ian Neilson, the pillock who couldn’t answer a single question about Day 0 in last weeks News24 TV interview.

I’m glad I didn’t take a 30% pay-cut to move to this dump.

The days of potty toilets, 2 hour long daily queues for water, fistfights over 5 litre bottles of water in supermarkets hasn’t really begun yet…

And it’s going to be ANC or coalition run after 2019…

Emotionally charged and insulting language as usual: “rats are jumping off this sinking ship”, “the pillock who couldn’t answer a single question”, “30% pay-cut to move to this dump”, etc.

Hey chiefy, save the snot en trane for Day 0 boet.

How did gentrification and densification of CT work out for you?

The headline is completely wrong. Didn’t anyone read the article before commenting
? CTs prices INcreased by 9.7% or 4.4% year on year (depending on of you look at the info in the article text or in the graph). This is better (by far) than any other house market in SA.

Currently there are 1348 properties advertised for sale in CT City Bowl/CBD.
1626 in the Southern Suburbs. 278 in Constantia!!!

It’s still just a trickle, the deluge (so to speak) is still coming…

Robert and woogoodly, maybe you guys should have googled the amount of properties for sale in Johannesburg and Sydney. So, what conclusion should we make when there are less properties for sale in Cape Town? People are willing to live without water in Cape Town rather than to live in Johannesburg or Sydney.

Ridiculous to suggest that house prices are being affected by the water crisis. Spurious correlation in the extreme.

Bit sensational heading with a “fall” in prices…..rather a drop in growth rate %

But having said that, yesterday (and during the past month) I noticed something that I haven’t noticed as much previously in Klerksdorp, NW: the odd (high-end late-model) car with a “WP” reg plate driving through our suburbs/suburban business district.

Either they happen to visit friend/family over here, or WCape people are scouting around for temp/alternate property for rent?

(…not that there’s no WP visitor to our town, but more noticeable, unless my imagination).

Irrespective, my municipal tap will be available for any Cape-visitor arriving with their water-bowser trailer 🙂

Well, according to evangelist Angus Buchan: “God is angry with Cape Town”. And “Cape Town must repent” for the rains to happen.

So the folks near Kalahari must be really really bad folks

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