The housing market in the Eastern Cape is outperforming other coastal markets, estate agency Pam Golding Properties (PGP) has reported.
PGP’s research showed that the Eastern Cape was extremely resilient, experiencing ongoing strong demand for homes and accelerating growth in prices which is outperforming other coastal regional housing markets. This is even as national house price inflation, and house price inflation in the major regional housing markets, have been slowing since peaking in mid-May 2021.
Data from real estate research group, Lightstone showed that while national house prices rose by 4.5% during the first five months of the year, January to May 2022, prices in the Eastern Cape rose by an average 8%.
The market was highly resilient during the pandemic, and, adjusting for the effects of Covid-1919 by averaging sales in 2020 and 2021, Eastern Cape city Gqeberha recorded total sales of 8 732 or 4 366 sales each year, which is the highest level of sales recorded since 2014. Meanwhile in East London, sales during 2020 and 2021 totaled 3 450 or 1 725 each year, the highest level since 2012, also demonstrating notable market resilience.
“The Eastern Cape is certainly well positioned to attract new home buyers looking to escape expensive, congested cities for larger, more affordable homes and a more relaxed lifestyle. This shift in home-buying patterns in the wake of the pandemic may well be contributing to Nelson Mandela Bay’s strong growth in prices over the past 18 months. In terms of price appreciation, during the first five months of the year, which is the latest data available, house price inflation in Nelson Mandela Bay averaged 9.0%,” said Justin Kreusch, Pam Golding Properties area manager in Gqeberha.
Pam Golding Properties research analyst, Sandra Gordon said that while in both Gqeberha and East London, housing stock is predominantly freehold, the percentage is higher in East London at 89.3% compared with Gqeberha’s 72.8%. While neither metro had a substantial number of homes located within estates, East London had a slightly larger percentage, 7.8%, compared with Gqeberha with 5.6%. The latter had a significantly larger housing market, with an estimated 90 869 homes, compared with 53 356 homes in East London, according to Lightstone.
With the exception of the years during the pandemic, the prices of freehold homes in both towns have closely tracked each other since 2013. Notably, Gqeberha’s freehold market has seen an uninterrupted increase in median prices over the past decade.
“While median freehold prices in East London softened in both 2020 and 2021, a surge in freehold prices during the year to date has almost closed the gap between the two metro housing markets once more. In 2021, East London’s median freehold price was R1.05m, which this year has risen to R1.35m, just R50 000 below the median price of R1.4m in Gqeberha.”
Gordon said that in both cities, freehold homes enjoyed stronger growth in prices over both a five and 10-year period. This is probably in line with the influx of semigrants seeking larger, freehold homes and a more relaxed lifestyle in the wake of the pandemic.
|Price (2022, median)||Five years %(2017 – 2022)||Ten years %(2012 – 2022)|
“Somewhat surprisingly – given that 73% of housing stock in Gqeberha is freehold – more sectional title properties were sold in 2021 and thus far this year than freehold properties, for the first time in at least a decade, which could perhaps be a reflection of the influx into the market of new, younger residents, possibly first-time buyers who typically opt for a sectional title home,” said Gordon.
Over the past 12 months, September 2021 to August 2022, 31% of all new buyers of homes in Gqeberha were young adults, aged 18 to 35 years, many of whom were likely to be first-time buyers.
“A possible contributing factor for the unexpected strength in the Nelson Mandela Bay housing market is that unlike many other areas in South Africa, employment levels have recovered beyond pre-Covid levels, in contrast with national employment levels which remain subdued,“ said Gordon.
While Buffalo City, which incorporates East London, has experienced a partial recovery in employment, particularly in recent months, employment in Nelson Mandela Bay rose to 390 000 in the second quarter of 2022, comfortably above its pre-Covid level of 356 000 in quarter one of 2020.
Commenting on the growth in Gqeberha’s housing market, Kreusch said historically, the city has been playing catch-up to other coastal metros.
“Home buyers, especially from out of town, are often surprised at the good value they can get compared to, for example, towns like Knysna, George and Mossel Bay, which offer comparatively less for your money. Out-of-towners are also contributing to a strong demand for rental homes, as they want to experience the city first prior to putting down permanent roots,” said Gordon.
“Our western suburbs continue to offer exceptional value – such as Rowallan Park, Parsons Ridge, Westering and Kabega, where there are often sizeable three or four-bedroom homes selling for around R1.5m. In Kabega you can pick up a good two-bedroom sectional title home from about R650 000 and a three-bedroom unit for approximately R950 000,” said Kreusch.
Kreusch said in general, activity in the sub-R2m mark had been strong in any suburb.
“With Gqeberha being the ’15 minute’ city we enjoy limited commute time. Even if you live on opposite ends of the city your maximum time to travel in peak times is around 40 minutes. Centrally located suburbs like Broadwood, Charlo, Glendinningvale and Mount Croix remain popular, with the bulk of purchases in the R1.5m to R2.5m price range. Lorrain also remains in demand and has seen many businesses migrating further west, especially the motor vehicle dealerships, while there are currently a number of commercial developments taking place along the William Moffatt Expressway,” Kreusch said.
“In the top end we’ve achieved some notable individual sales in excess of R8 million, which is rare for our market, while we’ve also seen steady activity in the R3.5 million to R5 million price range,” he said.
In East London, Pam Golding Properties area principal Sean Coetzee said historically low interest rates have played a large role in residential property market resilience.
“This is a vibrant market with high demand, so the challenge is to obtain the stock to sell. Coupled with this and contributing to the demand, our cost of living is lower than the bigger cities and offers a more relaxed environment that can be enjoyed by those who are now able to work from home. This trend has resulted in a large amount of those who previously left East London looking for better work opportunities – capitalising on the ability to return to their roots and work from here. As East London is known for its good schools, other new buyers are moving into the area, including government employees,” he said.
“Most of our home buyers are in the age group between 35 and 50 years, many in their 30s and buying a home for the first time or upgrading to larger homes, including those with work space, and mostly moving closer to schools in the East London area. They are generally seeking homes priced between R1.8m and R2.5m for a standard three-bedroom, two-bathroom home with double garage, pool and office or study. Those in the age group around 50 years are buying smaller lock-up-and-go homes, such as secure townhouse or homes on a smaller erf which has been subdivided, priced between R1.5m and R2m,” said Coetzee.
Image: Fernglen home, sold for R2.67m supplied by Pam Golding Properties