The hunt for value

Claire Wiese's R90m Clifton home. Picture: SUPPLIED
Claire Wiese's R90m Clifton home. Picture: SUPPLIED

As the housing market comes under renewed pressure along with the rest of the economy, home buyers need to become far more discerning in their suburb selection. It’s all about capital preservation and picking an area, or even a street, where property prices have the potential to outpace inflation.

Buying a house ain’t what it used to be. Ask Clare Wiese, the 33-year-old daughter of SA’s richest man, Shoprite chairman Christo Wiese. A few weeks ago she picked up a mansion on Clifton’s famous Nettleton Road at an auction, for what she considers a steal: a knock-down price of R90m, from an original asking price of R150m.

Wiese, the founder of jewellery brand Paka Paka, told the Financial Mail she’d had her eye on the house for a while but thought R150m was too hefty a price tag.

"We felt it was too high a price, given the fact that for that kind of money one really wants to design one’s own dream home rather than move in to a house designed by someone else," she said. "However, when it came up for auction, we decided to go for it and our bid of R90m was still below the upper ceiling of what we were willing to pay." At the price, Wiese says they got value for money.

"To build a house like that today, in that location, would cost more than R100m."

Wiese appears to have learnt some of her bargaining skills from her father, who she describes as her best friend. "My father, privileged as he is, still enjoys a boerewors roll at a kerk bazaar as much as a fancy dinner with world leaders. It’s about having your values in the right place and knowing who you are, with or without the big house."

But how do you even assess "value for money" in a hurly-burly housing market where, at the top end especially, prices have yo-yoed? After all, selling a house on SA’s prime street for a 40% discount suggests fractures at some level.

A decade ago, it was a different story. Then, you could buy even the humblest of abodes in just about any street and be sure of a decent profit three or four years down the line. Those days are gone — a consequence of the 2008 credit crisis that scuppered the myth that something could be "as safe as houses".

Housing prices tumbled across the globe, and many home owners who wanted to sell couldn’t, as they owed more on their bonds than buyers were willing to pay — the dreaded "negative equity" scenario.

Globally, things recovered to some extent between 2012 and 2015. But in SA, the recovery has been hesitant. House price growth over the past five years has hardly kept up with inflation.

In real terms, with inflation stripped out, FNB’s latest data shows the price of the average SA house today is still 21.9% below the record peak reached at the height of the boom, in December 2007.

And if you think that’s bad news, you probably don’t want to know how SA’s housing market has recently come under renewed pressure, prompting property economists like FNB’s John Loos and Absa’s Jacques du Toit to downgrade their house price growth forecasts to the low single digits for 2016 and 2017. That’s down from an average 6%-7% growth recorded by both banks last year.

From May, Loos says, house price growth has been in the red in real terms. Nominal growth slowed to a measly 1.9% in November, year-on-year — the slowest growth since 2011.

Absa’s latest research presents an equally sombre picture. In October, it recorded its lowest level of growth in four years. In the middle segment — houses priced up to R4.4m — growth slowed to a dismal 3.2%.

"Renewed market weakness shouldn’t really come as a surprise given the dismal state of the economy, rising interest rates and households’ mounting money woes," says Loos.

The upper end of the market has been whacked by higher income tax, large municipal rates and utility hikes, and increases in transfer duties for properties above R2.25m.

So does that mean you shouldn’t be buying property?

One region bucked the trend — the Western Cape, where house prices are still growing by more than 10%, fuelled by the "semigration" of Gautengers to the Cape.

Cape Town, in particular, has benefited from the notion that it provides a better lifestyle and has a better local government.

Neither Loos nor Du Toit expects the Cape’s allure to continue indefinitely. There have already been signs of a slowdown in volumes. Deeds office records show sales for 2016 will drop below 300,000 from 310,000 last year — way below the 480,000 transfers during the boom years to 2007.

Cash-strapped South Africans, it seems, aren’t upgrading as often as they used to either. Before the 2008 crisis, people would hold a mortgage for four or five years before selling. Today, the lifespan of a home loan has doubled to eight to 10 years.

If prices fall further, people will hold on to their existing houses even longer.

Paul-Roux de Kock, analytics director of Lightstone, says buyers need to become more selective than ever about where they choose to live. "To grow and protect one’s wealth, it is now crucial for home buyers to pick properties in suburbs where house-price growth is expected to consistently beat inflation," he says.

So where exactly can this holy grail be found?

The Financial Mail’s annual suburbs survey — our fifth in partnership with Lightstone — provides invaluable insight about which suburbs are best if you’re looking for your capital to grow.

We assessed the suburbs in various categories over one, three and five years in four cities: Johannesburg, Cape Town, Durban and Pretoria.

We looked at four price categories: the low end, where properties typically sell for between R650,000 and R1.3m; a middle category in the R1.3m-R2.5m range; a higher end of R2.5m-R4m; and the luxury section, at average prices above R4m.

Lightstone’s data refers to all sales registered at the deeds office to the end of June 2016.

However, only suburbs and estates with at least 50 properties and those that recorded more than five sales a year are included.

De Kock says that while price gyrations in the past year can highlight new suburbs to watch, such short-term spurts often fizzle out. "So it makes more sense to base your buying decisions on longer, three-and five-year trends,’’ he says.

Here are the key trends we found in 2016:

• There is a strong urban gravitation — a shift towards precincts that offer a pedestrianised, mixed-use environment close to public-transport routes where people can live, work and relax without getting into their cars;

• There’s a definite search for value in well-established suburbs that offer older properties with renovation potential;

• Demand for gated, communal living has intensified;

• Lifestyle estates have seemingly overtaken golf estates in terms of price performance. This is not all that surprising, De Kock says, given the phenomenal price growth that certain golf estates had in previous years. "Buyers are now looking for better value in other gated estates that haven’t yet had the same level of appreciation";

• Growth levels have slowed across the board. Last year, for example, prices more than doubled over three and five years in every winning suburb. This year, not one suburb had growth of more than 60% over three years. Over five years, only two suburbs had prices increase by more than 100% — Stellendale and Hagley;

• Cape Town has outperformed all other cities over three and five years. But over a 12-month period, the gap is closing.

JOHANNESBURG

 

Glitzy Melrose Arch takes the honours as Jozi’s top luxury suburb in the R4m-plus category over one and three years. The mixed-use precinct, just off the M1 freeway, bumps last year’s winner, perennially popular Parkhurst, off the 2016 rankings. A trendy spot for fashionistas and foodies, Melrose Arch is perhaps better known for its commercial and retail property proposition; offices here fetch some of the highest rentals in the country. However, Melrose Arch has also managed to establish itself as one of Gauteng’s most desirable residential addresses. Though it has only 179 residential units, earlier this year One on Whiteley was launched, which will double the number of Melrose Arch apartments to around 360 within the next two years.

About 60% of One on Whiteley’s one-and two-bedroom apartments have already been sold off-plan for between R1.85m and R7m.

Pam Golding Properties’ (PGP) Peet Strauss says this translates into an average R48,000/m², which is double the R24,000/m² fetched at Melrose Arch at the height of the boom in 2006/2007.

Strauss believes strong demand for the limited supply of rentals — especially from foreign corporates and contract workers — has underpinned the value. Fully furnished apartments are being rented out for between R16,000 and R35,000 a month — which means buy-to-let investors are getting gross rental yields of around 9%/year.

Four years ago, a 900m² penthouse was sold off-plan for a record R30m. It fetches R120,000 a month in rental.

Melrose Arch’s appeal, he adds, is its lifestyle offering — gyms, shops, sidewalk cafés, bars, restaurants and hotels – which provides after-hours action within a safe walking distance.

Benmore Gardens, a stone’s throw from the Sandton CBD, also makes its debut alongside Melrose Arch as one of the best performers in the upper end. Charles Vining, MD for Seeff Sandton, says the area is becoming increasingly popular with younger families and professionals because it is close to good schools (including Crawford Sandton), near the Sandton CBD, and its older homes have renovation potential.

With an average selling price of R5.3m, Benmore Gardens is also good value relative to swankier neighbours like Morningside and Sandhurst.

Lifestyle estates Cedar Lakes in Fourways and Thornhill in Modderfontein, north of Johannesburg, feature in the R2.5m-R4m category. So, too, do older suburbs within easy reach of Sandton and Rosebank (and their Gautrain stations), including Craighall Park, Birdhaven and Illovo.

Craighall Park, until recently regarded as the ugly sister of nearby Parkhurst and Parktown North, has undergone plenty of gentrification in recent years, with old properties on large stands being snapped up at a good discount to more fashionable neighbourhoods.

Vining says Birdhaven, in the northeast near Melrose Arch, is also being discovered by value-chasers in search of redevelopment potential.

Killarney, Jozi’s best-performing mid-priced suburb, is just off the M1 freeway and offers spacious apartments, often in old, art-deco buildings. The area has become increasingly popular among young creatives.

Broadacres, a fast-growing suburb in the Fourways node, was the top performer in the sub-R1.3m category. The area has a large supply of new townhouse and cluster complexes, making it ideal for first-time home buyers and buy-to-let investors.

Bellevue, behind Yeoville, shines in the sub-R1.3m category.

RE/MAX’s Jane Keys says Bellevue is appearing on the radar of buy-to-let investors thanks to a strong rental market. Despite sharp price increases in recent years, investors can still buy an apartment block in Bellevue, typically housing 12 large flats, for R3m-R3.5m.

Three-bedroom flats fetch around R5,500/month while three-bedroom houses sell for R850,000-R1.2m and command rentals of R13,000-R20,000 a month.


 

CAPE TOWN

Last year’s winning luxury suburbs — the once-sleepy, rural enclave of Noordhoek on the southern peninsula as well as Stonehurst Mountain Estate at the base of Ou Kaapse Weg — have been pipped to the post by City Bowl suburbs, notably Oranjezicht and Vredehoek. Neither of those had made it onto the Cape Town rankings before.

The Atlantic Seaboard suburbs of Fresnaye, Sea Point and Three Anchor Bay, close to the Cape Town CBD, also feature prominently this year.

One reason for this soaring demand for the City Bowl, say the experts, is an improvement in public transport — the MyCiti bus route, in particular. The astounding rise of the Airbnb accommodation phenomenon has helped too, says Warren Emett of Seeff’s CBD and City Bowl team.

"Apartment prices in the City Bowl have rocketed as buyers look to acquire an asset they can turn into an Airbnb money-spinner."

Bev Josten of PGP’s City Bowl agency says Oranjezicht, with an average selling price of R6.6m, is highly sought after because it is near the CBD and has an array of fantastic shops, restaurants, bars and night spots. Properties vary from grand Victorian-style residences to quaint studio flats, generally with views over the city. The suburb is also home to the sprawling De Waal Park, a popular dog-walking spot.

Nearby Vredehoek, on the slopes of Table Mountain, is more affordable than Oranjezicht (with an average selling price of R3.6m) but with great views and a quick commute to the city centre. A popular area to rent for the young and upwardly mobile, Vredehoek offers a mix of stand-alone houses, flats and townhouses. Many of its older apartment blocks have been revamped.

Seeff Atlantic Seaboard agent Adrian Mauerberger says Sea Point’s attractions are its location (perched between the city centre and the Atlantic Seaboard), tree-lined promenade, vibrant night-life and a village vibe created by an eclectic variety of shops and cafés. Sea Point offers a 50-50 mix between full-title houses and apartments — both property types still more affordable than in neighbouring Bantry Bay, Fresnaye, Clifton and Camps Bay.

Nearby Three Anchor Bay, a small area traditionally favoured by retirees, is luring more investors and second-home buyers due to its beachfront location and walking distance to Sea Point and the V&A Waterfront. A number of modern, high-rise apartment buildings have been built in Three Anchor Bay in recent years. Seeff Atlantic Seaboard agent Hilary Biccari says prices range from R1.5m for a 40m² studio to R3.2m-plus for two-bedroom apartments.

The only Cape Town golf estate in this year’s rankings is Atlantic Beach Golf Estate near Melkbosstrand on the West Coast.

In the categories below R2.5m, Cape Town’s northern suburbs still reign supreme. Avalon Estate in Durbanville retains last year’s top spot. Known for its value for money, Avalon appeals to first-time buyers, young families, and retirees looking to downscale.

Overall, Cape Town’s biggest winners over the past five years are the lower-end suburbs of Stellendale and Hagley in the Kuils River area, halfway between Cape Town and the Cape Winelands. In fact, Stellendale and Hagley are the only two suburbs in this year’s survey where average prices have more than doubled in the past five years. Both areas have had a surge of townhouse and small cluster developments that appeal to first-time buyers, especially those looking to upgrade from nearby townships and the Cape Flats.


 

PRETORIA

Communal living is still top-of-mind for Pretoria home buyers. Gated estates dominate this year’s luxury, high-end and middle-end suburbs.

Last year’s winning golf estates — including Silver Lakes, Centurion Golf Estate, Waterkloof Golf Estate and Zwartkop Golf Estate — have made way for lifestyle and country estates.

Mooikloof Equestrian Estate on the eastern outskirts of Pretoria, where palatial homes on large stands fetch up to R22m, has comfortably overtaken nouveau-riche golf estate Woodhill as the city’s wealthiest residential address. In the R4m and over category, Mooikloof is 2016’s best-performing suburb over one year (price growth of 8%), three years (32%) and five years (52%). The estate consists of 548 stands of 1ha each.

Seeff Pretoria East consultant Dominique Lochoff says prices start at around R4.5m for an entry-level, three-to-four-bedroom home. Five-to-seven-bedroom homes with large entertainment areas, pools and tennis courts sell for upwards of R10m.

Three other gated estates, The Wilds, close to Woodhill in Pretoria East, Irene Farm Villages, and Candlewoods (the latter two both conveniently situated close to Centurion, halfway between Pretoria and Johannesburg) are also among Pretoria’s top-performing higher and middle-end suburbs.

The 250ha Irene Farm Villages has a quintessentially country feel, offering sprawling parklands and conservation areas.

Steve van Wyk, MD of Seeff Centurion, says the estate appeals to professionals and families looking for a tranquil environment within easy reach of major transport networks, business hubs and good schools. Homes vary in price from R2m to R7m.

Candlewoods Country Estate in Centurion, however, attracts a younger and more aspirational crowd, often first-time buyers, at an average price of R1.8m.

"It’s popular because it offers an attractive environment at a lower entry price than most of Pretoria’s other gated estates," says Pam Golding Properties’ Retha Schutte.

Brooklyn, traditionally favoured by Pretoria’s academic and diplomatic fraternity, also features in the R2.5m-R4m category, with plenty of large, older properties ripe for renovation and subdivision.

At the bottom end, homes fetching between R650,000 and R1.3m, the clear winner over three and five years is Daspoort Estate, which is just off the R80 north of Pretoria Central. It ticks many of the right boxes: it’s affordable and close to Pretoria’s CBD, government hospitals, schools and the Tshwane University of Technology, says RE/MAX’s Elzette Lange.

Old, sturdy homes on big stands that need a bit of TLC sell for between R600,000 and R800,000 while revamped properties fetch up to R1.1m.


DURBAN

Surprisingly, SA’s eastern metropolis is the only one of the four major metros where the usual suspects in the higher and upper end categories have retained their top spots.

Home-buying decisions among wealthier Durbanites are still centred on sea views, proximity to good beaches and easy access to major business nodes, schools and shopping centres. Unsurprisingly, Umhlanga, on the north coast, remains the most desirable top-end address in the greater Durban area.

Charmaine Powell, sales manager for Chas Everitt International in Umhlanga, says the area has had an influx of international property buyers in recent years, with top-end apartments in newer or renovated buildings such as The Pearls, The Oysters, Edge of the Sea, and Seashore fetching between R40,000/m² and R60 000/m².

This year, Powell sold a 477m² apartment in the Oyster Schelles development for R24m. At the acclaimed Pearls of Umhlanga complex, penthouses with magnificent sea views come with price tags of up to R20m, while Hawaan Forest Eco Estate is selling homes for between R10m and R16m.

Equally, Glen Ashley in Durban North, Umhlanga golf estate, Mount Edgecombe and La Lucia also retain their spots in the higher-end categories. The only new contender in the R2.5m-R4m category is Plantations, a Tuscan-styled gated estate in Hillcrest. Michele Wilson, Seeff director in Hillcrest and Kloof, says Plantations consists of 800 apartments and stand-alone properties set among landscaped gardens.

Ever-popular Glen Ashley, a family haven nestled between Durban North and La Lucia, where most homes have beautiful sea views, is the top performer in the R2.5m-R4m category over three years and five years.

At the middle and lower end of the market, Prospect Hall, Glen Hills, Sunningdale, North Beach and South Beach are stand-outs. Carol Reynolds, PGP’s Durban area principal, says North Beach’s status as a holiday flat and buy-to-let destination has been elevated by the general upgrades to its Promenade. Two-bedroom flats sell for around R1m while front-row units with sea views fetch around R1.5m.

"The area offers exceptional value, given its prime position."

So if you’re looking for a key trend from this year’s suburb watch, it is that buyers are deepening their search for better value.


 

With economic growth stuttering along at less than 1%, people are more concerned with getting it right, rather than buying because the heart says so.

Of course, it is not ever possible for one to strip the emotion from such a decision entirely.

Clearly for Wiese, her R90m purchase was a decision made as much with the heart as with the head.

"I have lived in Clifton all of my life, so I really couldn’t imagine living anywhere else. To me, it is probably the single most beautiful part of the world," she says.

Until now, Wiese has stayed in a small bungalow down the road from her new purchase, on Clifton’s Fourth Beach.

The new house, she says, has a zen-like feel to it.

"We looked at quite a few other houses in Clifton, Nettleton Road included, and most of the houses are colossal, with very little warmth to them.

Though we wanted space, we wanted a house that could be made a home."

At the right price, of course.

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