Cape Town’s First-time Buyers Opting for Jozi Address
Johannesburg is becoming the “residential address of choice” for many first-time buyers from Cape Town, where the steep rate of home price growth, and relatively static income levels, are effectively pricing many of them out of their home market.
This is according to Ronald Ennik, who says at Ennik Estates which focuses on Johannesburg’s Northern Suburbs and Sandton, the commercial and financial capital of South Africa, is where they have “spotted the trend”.
He says there is no question that the wide gap between second-quarter 2016 home price growth of 15.7% in Cape Town against just 2% in Johannesburg (FNB House Price Indices data) is “reason enough for young Capetonian executives to move north and settle”.
“For them, remaining in Cape Town and renting a home is generally not a viable alternative, because rental levels are moving in tandem with home price inflation.”
Rising cost of living
Furthermore, the cost of living in the Mother City is outstripping static local salary levels, which are reportedly now around 25% lower than in Johannesburg, says Ennik. Unemployment is also a factor.
“It is partly as a result of a steady flow of LSM7+ investment by wealthy Johannesburg buyers that Cape Town homes market has been on the boil so far this year. And their focus has essentially been on the Atlantic Seaboard, the City Bowl and the Southern Suburbs.
“Many of them are captains and lieutenants of inland-based commerce and industry, many of whom prefer a weekly commute between their homes in the Mother City and their (mainly) Johannesburg-based business operations.”
Ennik notes this ‘migration’ process is also overflowing into adjacent areas such as Stellenbosch – home to South Africa’s own unfolding Silicon Valley – and Franschoek.
Another factor driving home prices in Cape Town in the past has been the increase in foreign buying interest – on the back of rising tourism and the weak rand that “made the city’s property so much more affordable”, says Ennik.
“It is thus no surprise Cape Town currently heads the list of South Africa’s top 10 suburbs – seven, against three in Johannesburg – and boasts far more R20 million-plus homes (880 against 550).”
Furthermore, he says although significantly smaller than Johannesburg, Cape Town currently sells twice as many R20 million-plus homes, and also outstrips Johannesburg sales in the R40 million-plus price bracket.
An extreme example, Ennik says, was the recent R290 million sale of an Atlantic Seaboard property to a foreign investor.