National trends versus the coastal "bubble"

Plettenberg Bay, as has been the case with all the "semigration" property magnets along the Garden Route and Western Cape's coastline, might be in a property price bubble, bucking the national trend.

But it does not appear that the bubble is about to burst as coastal residential property is still a hot item - and remote working from home has become a drawcard adding to the lure offered by Plettenberg Bay.

Property sales in Plettenberg Bay continued their upward trend with 942 properties, in all areas and price ranges, registered with the Deeds office in 2021.

Many new families from various provinces moved to Plettenberg Bay and surroundings, as part of the "semigration" trend, making the Garden Route their new home.

Helen Ward, Principal of Helen Melon Properties, says this because of the lifestyle options Plett offers, namely a more secure, and laid-back beach and family environment.

According to SA's most prestigious property analysis publication, the Rode Report, nationally nominal house prices continued to decelerate, and growth may be negative by the end of 2022. This is because of fundamental factors, such as the weak economy, which may lead to even higher unemployment, stagnant salaries and rising interest rates.

Erwin Rode, chief editor of the Rode Report, pointed out the big unknown is to what degree the semigration to Plett and other coastal towns in the Garden Route will in the coming years cancel out the negative effect of a struggling SA economy. The semigration is driven by concerns about safety and dysfunctional municipalities outside the Western Cape province -- and of late by the work from home trend. The latter is not to be underestimated, says Rode. Two of his nieces over the December holidays came from Sweden and Switzerland respectively and stayed on for a few more weeks because they could work from his brother's home in Camps Bay.

"The work-from-home trend has been a killer blow for the (office) sector, and its impact is bound to be felt for years to come," says Kobus Lamprecht, Rode Report's editor.

According to Rode's residential survey, data flat vacancy rates averaged 10,1% in the fourth quarter of 2021. This is unchanged from the previous quarter.

Vacancies generally improved in 2021 after hitting a peak of 13,1% in the fourth quarter of 2020 but remain at double pre-pandemic levels. However, Lamprecht says there are no signs yet that the improvement has resulted in increased rental growth.

According to FNB, data nominal house prices rose by 3% year on year in October 2021, gradually slowing from the pandemic peak of 5,1% in April 2021.

"The trend for 2021 showed that prices increased by 4,2% year on year over the first ten months, boosted by record-low interest rates. This was roughly on par with consumer inflation which was 4,3% over the same period," says Lamprecht.

"House prices will probably end the year in negative territory in real terms given the increased inflation rate to 5,5% in November. It's worth noting that in nominal terms, the growth rate has consistently been decelerating since May 2021."

He says that slower house price growth was to be expected, given the fading impact of lower interest rates amid record-high unemployment figures and an economy struggling to get back to pre-pandemic levels.

Main points from the latest Rode report are:

• The property market generally performed better in 2021 than in 2020.
• The SA economy has still not reached 2019 levels, and Covid-19 remains a threat.
• Property fundamentals like office vacancy rates and market-rental levels are still of great concern.
• The market is not out of the woods just yet.
• A full recovery is still a few years off.
• Continued growth deceleration in nominal house prices and growth may be negative by the end of 2022. This is because of fundamental factors, such as the weak economy, which may lead to even higher unemployment and rising interest rates.

"The crucial question in 2022 is by how much interest rates will be hiked and how quickly. Unfortunately, the answer to this question is unknown," says Lamprecht.