THE GARDEN ROUTE IN REVIEW

THE GARDEN ROUTE IN REVIEW

Category STATISTICS

2018 posed its own challenges economically with many influential factors dominated by the land expropriation talks, corruption and the impact thereof on the economy  directly affecting consumer and investor appetite for new acquisitions. Or so one would think?

Statistics released by Lightstone emanating from registered transfers indicate differently though as most areas along the Garden Route has shown an increase in value from a capital growth point yet also prominent movement in transfers registered.

To put the above into perspective an assessment of a few popular areas has been done.

Mosselbay

In summary it is evident that Mosselbay's market showed a steady decline in volume of sales which merely indicates to me that demand exceeded supply. More property owners held onto their assets thus buyers had less options to choose from and were compelled to commit themselves to available stock. The capital growth component indicated above therefore an indication that when demand exceeds supply, there will be an increase in median price.

A reduction in sales volume could be ascribed to uncertainty in the market place as a result of political instability and as a result of an economy taking strain thus reducing the number of secondary homes / luxury homes being sold.

George

George faces an enormous demand for affordable rental property whilst it is evident that an over-supply in new developments are available in the upper market segments resulting in minimal growth and negative moment in sales volume for the freehold segment.

Sectional title homes are held onto by owners thus resulting in the drastic decrease in sales in this segment and also as a result of building activity not focused on higher density development.

The high development activity in the upper market segment also puts strain on growth in the "second-hand" segment of homes as secondary sellers can not compete with developers for inclusion of transfer duties as a popular cash flow structure whilst favorable and less conservative lending by banks imply that purchasers can extend themselves for higher values in new developments without the impact of transfer duties on their cash flow.

Capital growth in the upper value segments will therefore probably remain stagnant whilst new home sales will flourish.

The constant proclamation of new developments in the area however will probably have a negative impact on current available land value.  The volume in land sales will therefore probably increase yet the value thereof for the next period of 12 months not expected to show such immense growth in value.

Knysna

 Knysna has shown similar tendencies than most of the towns along the Garden Route. The negative volume once again can be ascribed to the economic uncertainty experienced. Retiree semi-grants normally flock to Knysna as a popular destination.

The impact of the 2017 fires have probably been felt in 2018 as this town has entered a restoration phase and will soon render positive growth and increased sales volumes.

Plettenberg Bay

Plettenberg Bay is a popular destination of secondary- and vacation homes. The state of the economy in South Africa can be seen in the statistics presented for this area as there has been a drastic decrease in sales volume in all segments.

Negative growth in land value is noticeable whilst the more affordable segment of sectional titles, despite a slight decrease in sales volume has grown substantially in value. The number of assets being marketed in this area has not decreased though, it is merely obvious that buyers are sensitive to multiple property ownership given talks of land redistribution.

Sedgefield

Sedgefield remains a popular holiday destination.

The town has shown positive capital growth in all property types with Sectional Title Schemes (Estate Living) peaking at 25% growth in median value and freeholds increasing in median value of 11%.

The volume in sales are constantly low and have showed constant values for the past 4 years.

Wilderness

As could be expected, the upper market segments have also taken strain during the past 12 months. Wilderness is also a popular destination for secondary and luxury homes yet positive growth has been recorded only in the value of land and sectional title segments.

Sectional titles are high in demand and emphasizes the tendency of home owners to venture towards safer communities.

SUMMARY

George appears to be the main development node in this region and increasing in corporate activity during the past 12 months.

Whilst this region has its limits from an economic opportunity point of view currently, for aspirant retirees it offers a high quality of life and is arguably more affordable than Cape Town.

It is evident that throughout this region, lower price segments have performed noticeably better with land acquisition being very active.

The Southern Cape and Garden Route area has become a more popular area because of the drastic deterioration of home affordability in the Western Cape.

KPS Garden Route have representatives to serve your real estate investment interests along this region.

Author: Johann Cronje