The GNU effect: Jo’burg property sales rising fast

Billions of rands have been flowing into the Johannesburg real estate market since the start of 2024, especially since the formation of the Government of National Unity (GNU) in early June, which has brought about a sharp increase in business and investor confidence in SA’s economic prospects.

That’s the word from Rory O’Hagan, principal of the Chas Everitt Hyde Park & Sandton branch, which has notched up more than R800m worth of home sales in Johannesburg’s northern suburbs in the past seven months.

“We have noted increased property demand in our area – and actually right across Gauteng – since the beginning of the year,” he says, “and this is clearly reflected in the latest Absa Homeowner Sentiment Index (HSI), which shows that overall confidence in the Gauteng property market rose from 64% in the second quarter of 2023 to 72% in the same period of this year.

“But the GNU has really boosted interest among both local and foreign investors and resulted in a significant upturn that has taken this office from a monthly average of R100m in sales earlier in the year to over R150 a month in June and July – with the majority of those transactions being in the R2m-R5m and R5m-R10m ranges.”

O’Hagan says that the exceptional value currently available in the Johannesburg market continues to be one of the biggest drivers of sales, with homebuyers and investors anticipating rising demand and rapid price increases in the wake of interest rate decreases from September onwards,

“At the moment it is definitely a buyers’ market, with lots of stock, sellers willing to negotiate and prices at 2018 or 2019 levels, thanks to below-inflation growth for the past five years. And that is obviously very attractive to prospective buyers still battling the effects of high inflation and high interest rates, as well as investors who are preparing for an improved rental market in Johannesburg as SA’s economic fortunes improve.”

Over the past five years, Covid-19, semigration, loadshedding and infrastructure problems have seen the Johannesburg market lose out heavily to Cape Town, as reflected in the latest Residential Property Price Index (RPPI) from StatsSA, which shows that while property prices in the Western Cape rose by an average of 7,7% in the 12 months to end-March, prices in Gauteng rose by just 0,7%.

In addition, the latest figures from property data company Lightstone show that while Gauteng currently accounts for 35% of all residential sales in SA, these are only worth 37% of the value of sales, but the Western Cape, with just 18% of sales, accounts for 30% of the total value of sales.

“However,” he says, “Johannesburg is still the financial heart of SA and home to most of the country’s top companies and multinationals, so it stands to benefit most as the economy picks up and more jobs are created. And already, we find that most of the expat and foreign buyers coming into the SA market now are choosing Gauteng as their base, because it offers them the best employment and business prospects as well as much less expensive properties.

“Meanwhile, comparative value is playing a significant role in also attracting buyers back to Gauteng from the Western Cape in the process we call reverse semigration – and in a sharp reduction in semigration from Johannesburg and other inland areas to Cape Town and other coastal areas that became popular following the Covid-19 pandemic.”

StatsSA figures show that prices in Cape Town rose by a total of 27,5% between 2019 and 2023, but that those in Johannesburg rose only 8,6%, says O’Hagan. “In the Western Cape as a whole, prices rose 35,5% over the five year period, while those in Gauteng rose 16,4%, with the result that those who sell homes in Cape Town now can often upgrade substantially if they move to Johannesburg, and that those who own homes in Johannesburg now often decide against a move to the Cape when they realise how much more they would have to pay for an equivalent home.

“Indeed, the Absa HSI shows that confidence in the Gauteng market is currently higher than that in the Western Cape market for the first time in many years. What is more, many other South Africans are moving to Gauteng. The Migration Report released by StatsSA earlier this year reveals that the region accounts for 52% of all job opportunities in SA and consequently attracts many migrants from other provinces. In fact, almost a third of the region’s 16m residents are from other parts of SA.

“And with so many of these migrants being young job seekers or entry-level employees who most likely won’t be buying homes for some time, the region also offers property buy-to-let investors excellent prospects for the foreseeable future.”

The Absa HSI also shows that only 71% of those currently renting are actively planning to buy their own homes, with the remainder mostly preferring the affordability and flexibility of renting. “As a result, overall investor sentiment has risen from 72% a year ago to 80%, and in Johannesburg we are already seeing the effects of that in substantially increased demand for one and two-bedroom rental apartments close to Sandton and other commercial hubs such as Rosebank and Midrand.”

Issued by Chas Everitt International