Property Talk

Migration is driving property prices

There is a structural change occurring in our residential real estate economy within South Africa. We are experiencing this first hand along the Dolphin Coast as families from Johannesburg and Pretoria are making life-style decisions and moving their families and business' down to the greater Ballito area.

The Western Cape has been experiencing a similar migration but at an entirely different level, and as a result has been driving property prices to the extent where affordability may become a problem.

This is not necessarily a bad thing as it is the normal response to demand for any limited good or service - the price goes up. It does make the other alternate opportunities, such as the Dolphin Coast residential real estate market, look increasingly more attractive in that it represents comparative value for money.

The obvious question is how do we accurately measure these migration flows FNB have come up with a genius proxy using readily available deeds office sales data. They identify all purchasers by individuals ("natural persons") where there is a corresponding sale by the same individual within 12 months before the purchase or up to 18 months following the purchase.

Although the bulk of this "repeat buying" is within the same province, a portion of these purchases were in a province other than where the corresponding sale took place. It is this figure, so easily calculated, that represents an excellent proxy to the actual inter-provincial re-location rate or what has been termed the "repeat buyer semi-gration" rate.

Although it will exclude some holiday home buying and 1st time buyers who say migrate up to Gauteng and then buy their first home, it is nevertheless a great indicator of a large portion of semi-gration flows.

So what is the data telling us The size of this interprovincial repeat buying behavior represents as much as 15.8% (2016 figures) of total repeat home buying and this is up from 12.8% in 2015 and 11.4% in 2014. It is a rising trend and does not show signs of diminishing. We see that the Western Cape's outflow of repeat individual buyers is the lowest at 7.6%.

The net inflow of repeat property buyers to the Western Cape is 15.7%. The only other province that is currently measuring a meaningful net inflow is Limpopo at 4.7%. KZN is experiencing a net outflow of -3.1%, Gauteng of -9.1% and the Freestate of -7%.

Is it true that Gauteng is moving to Cape Town The figures show that repeat buyers leaving Gauteng for Cape Town has skyrocketed from 0.8% of buyers in 2009 to 9.1% by 2016. The similar percentage of Gauteng repeat buyers leaving that province for KZN has only risen from 0.6% to 1.9% over the same period. It does therefore appear that the Western Cape is experiencing a relative competitive advantage in attracting buyers.