A FLAT MARKET
Joburg apartment market flatlines
Inner-city apartment sales of R1m or more have stalled, but there's still plenty of action in the sub-R500,000 bracket
A split-level penthouse apartment in the historic Barclays Bank headquarters in downtown Joburg is on the market for R3.99m — believed to be a record for inner-city asking prices in Gauteng.
To date, the highest price paid for a sectional-title residential unit in the Joburg CBD was R3.3m.
That was in July 2017, for a 228m² loft in Hallmark House, in the artsy Maboneng precinct, according to data from Lightstone Property (see table). Now, the 300m² penthouse at 87 Commissioner Street is poised to move that mark.
The apartment belongs to German academics Karin Reinprecht and David Hancock, who in the mid-to late-2000s bought a number of units in the Art Deco building from developer Urban Ocean. The latter entered the Joburg CBD in 2004, following flight from the area in the late 1980s.
Urban Ocean was one of the first developers to turn derelict office buildings in the old financial district into upmarket apartments. At the time, it also sold a 226m² shell in nearby Corner House to entrepreneur Wendy Luhabe, wife of former Gauteng premier Mbhazima Shilowa, for a then unheard-of R1.25m.
Other developers followed suit, and a number of office-to-flat conversions with price tags of R800,000-R2m were brought to the market in the area, as well as in Newtown and Braamfontein. But Urban Ocean’s ambitious plan to revive inner-city living among higher-income residents stalled when the credit crisis and subsequent recession hit in 2008/2009.
By 2012/2013, well-heeled buyers had re-emerged, this time in Maboneng, where Propertuity was turning mothballed industrial warehouses into a vibrant mixed-use live, work and play hub.
In early 2013, a 173m² apartment in Maboneng’s Artisan Lofts fetched a record R1.8m. The precinct quickly became a hot spot among the artsy set, and in the next four years a number of sales in the R1.8m-R3.3m bracket were concluded.
Sadly, residential sales in Maboneng started to dry up from mid-2017 and Propertuity was put into liquidation last October. Last month, portions of the precinct went under the hammer.
The general view is that Propertuity didn’t have the financial resources or sufficient support from the municipality to halt creeping urban decay. And, like Urban Ocean, it was pitching its residential units at too high a price, given the state of Joburg’s inner-city infrastructure and an overall dip in housing sales.
So it will be interesting to see whether the penthouse owners will get their R3.99m asking price. An offer of R3.2m was made on the unit in 2013, but fell through.
Brian Goso, the Pam Golding Properties (PGP) CBD agent marketing the penthouse, says it has become difficult to sell inner-city apartments for more than R1m. Apart from a general slowdown in SA housing sales, he also blames the ongoing decline of building and municipal infrastructure.
Though there are pockets of excellence, Goso says the city’s urban renewal projects haven’t all come to fruition, and many buildings are in a state of disrepair. Grime is also an issue. And he says street vendors contribute to the overall feeling of neglect as they are not well regulated.
“It has become tricky to sell higher-priced units in the inner city. Those who can afford R900,000-plus don’t want to take the risk of buying in an area where it is uncertain if and when surrounding infrastructure will be upgraded,” says Goso. “They would rather buy in Killarney or Rosebank, even though the inner city offers far better value for money.”
He says upper-end units in the inner city typically sell for R13,000-R18,000/m², which is less than half the R30,000-R35,000 sectional-title buyers pay in Killarney or Rosebank. However, demand remains strong for units in the R300,000-R800,000 bracket.
Goso notes that many of the upper-end office-to-flat conversions that were brought to the market over the past 10 to 12 years have been converted into more affordable buy-to-let and student housing, which fetches rental of R1,800-R10,000 a month.
In fact, the most recent inner-city housing data from Lightstone Property shows that Joburg’s inner-city housing market is most active in the bracket below R500,000. The average sales price recorded in the year to date is R288,822. Lightstone’s stats include Hillbrow, Berea and suburbs on the CBD’s eastern fringes, such as Bellevue, Doornfontein, Bertrams, Troyeville and Yeoville.
Though the average inner-city sales price dipped in 2010 and 2013, and again last year, apartment prices in the inner city have more than doubled over the past 12 years (from R130,656 in 2007; see graph).
However, sales volumes have almost halved over a decade: 1,480 units were sold in 2008 against 787 last year.
Those who can afford R900,000-plus don’t want to take the risk of buying in an area where it is uncertain if and when surrounding infrastructure will be upgradedBrian Goso
In a recent report on Joburg’s inner city, PGP senior research analyst Sandra Gordon notes that 80% of all residential sales concluded in the first quarter of 2019 were made by investors; only 20% were by buyers who plan to live in their units.
Notable sales concluded by PGP in recent months include two bachelor units in Braamfontein (for R485,000 and R590,000), while in Yeoville a one-bedroom apartment sold for R250,000 and a two-bedroom for R410,000.
Gordon says a fair number of cash buyers from other African countries — including Cameroon, Angola, Nigeria, the Democratic Republic of Congo, Mozambique, Ghana and Zimbabwe — have entered the inner city (Berea and Yeoville in particular).
Against a flat national market, she says inner-city buy-to-let investors are achieving average yields (annual rental income as a percentage of market value) of about 12% and, in some cases, more. For example, freehold houses in Yeoville with three to four bedrooms fetch monthly rentals of R7,000-R15,000.
Hillbrow still offers the best value, with prices for bachelor flats starting at R100,000 and one-bedroom apartments at R150,000. Rentals start at about R2,500 a month.
In Berea, which is the inner city’s largest housing market, entry-level, one-bedroom apartments are priced from R250,000-R380,000, with two-bedroom apartments starting at R350,000. Freehold homes with up to four bedrooms reach R650,000-R1.4m.
Bellevue East, bordering Observatory and Upper Houghton, was the best-performing inner-city suburb last year, with price growth of 5.4%. In the 12 months to March, nine freehold properties sold at an average R825,000, while 31 sectional-title units changed hands at an average R317,000.
“Bellevue East is an unusually stable market, with 62% of existing homeowners having owned their properties for more than 11 years,” says Gordon.
She adds that while most of these owners are middle-aged or retired, the area is also luring more first-time buyers — no doubt because of its value-for-money proposition.