Bugle Sales Talk Editorial

Author: Andreas Wassenaar
Date: 2015-08-28

According to FNB's Estate Agents survey approximately 3% of all residential property buying is for a holiday home. As Ballito has historically been regarded as a holiday town this is of interest. However over the past 10 years a trend towards primary residences has emerged and we certainly cannot refer to Ballito is a purely holiday town anymore. For estate agents this is a good thing as primary residential markets are typically less cyclical than secondary holiday home markets as these homes are considered "non-essentials" and pricing can be severely depressed as the economic cycle declines or contracts.

We experienced this in the greater Ballito area after 2008, and while the primary residential market price growth recovered in 2010 the Holiday Town Price Index showed negative growth or very low positive growth until 2013/2014. Ballito reflected this national growth trend. The peak in the recent price growth happened in the 2nd quarter of 2014 with quarter-on-quarter growth of 3,2%. Since then we have seen four consecutive quarters of price growth decline to its current 1,9% quarterly growth rate measured in the 2nd quarter of 2015. Given the low base from which the current year-on-year price growth rate is measured for holiday towns, it is still showing a relatively high growth rate of 10%, which is above the current 7,4% for non-holiday primary homes in the major metro areas. The significant comeback that holiday home demand experienced during 2014 is therefore on the decline and we can expect the price growth gap between holiday and primary residential markets to narrow further.

So how does the very top end primary residential market compare to the top end of the holiday market in South Africa? In a recent article published in the Financial Mail by Joan Muller, the new Houghton development in Johannesburg was featured with an asking price of R100m for a 1,700 sqm penthouse. This multi-storey development consists of 210 sectional title apartments plus a recently launched hotel component consisting of 143 rooms and an additional 38 apartments. I have been fortunate enough to visit the Houghton development and experience first hand the highly specified penthouse apartments, which redefine residential luxury with only a handful of homes in Zimbali being able to compete.

To date the highest price achieved at the Houghton was R55m for a 1,238 sqm apartment. This amounts to R44,426.49/sqm - very high by Zimbali standards but the norm along the Atlantic Seaboard in Cape Town. For the purposes of this analysis I regard the Houghton as a flagship primary residential market .The highest prices actually achieved for a comparable type property can be found at the One and Only development in Cape Town, which has three incredible penthouses on the top floor of the impressive hotel. I regard these properties as representing the top-end holiday home market. The actual transactions recorded in the deeds office show that Unit 1 traded in 2011 at R63m and consisted of a 1,050 sqm apartment and 80 sqm garage. This translates into a rate of R55,752.21/sqm. Unit 2 traded in 2012 at R55,500,000 and consisted of a 792 sqm apartment (the "small" one) and 76 sqm garage. This reflects a rate of R63,940.09/sqm. Unit 3 traded in 2008 at R108,000,000 and consisted of a 1,076 sqm apartment with 79 sqm garage. This was therefore the record price at R93,506.49/sqm.

As incredible as the Houghton is as a development, the pricing still has some way to go before it can seriously rival Cape Town's Atlantic Seaboard. I have contended for many years that Zimbali properties are still hopelessly under-priced for what they offer.

For further information and an interactive analysis of this article follow my blog: andreaswassenaar.blogspot.com.

Andreas Wassenaar

Principal - Seeff Dolphin Coast

Cell: 082 837 9094

andreasw@seeff.com

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