Plett Property Market Paints Interesting Picture

Plett Property Market Paints Interesting Picture

The slowdown in Plettenberg Bay's property market during the first quarter of 2024 is again reflected in the reduced number of sales registered by the Deeds Office in Q1

Sales in Plett were down 16%, compared with the first quarter of 2023 which in turn were 42% down within the first quarter of 2022. Buyers are showing reticence to buy properties in the higher price brackets. Helen Ward, principal of Plett's exclusive boutique agency, says one of the reasons for this trend is that potential buyers are waiting for the outcome of the elections, scheduled for May 29.

While the lower end of the market remains down, this is due to stock availability following the spurt of sales in that segment of the market seen in recent times.

The latest Deeds Office figures indicate that four of the 20 sales in the R5m- R7m price bracket were registrations from the new sectional title development at The Plett Quarter at Dolphin Circle. In the of the R7m -R10m bracket six of the 14 sales were also registrations from The Plett Quarter development.

In the suburbs, Upper Central recorded the highest number of sales registrations at 25, due mostly to the 12 units at The Plett Quarter.  Other Sectional Title registrations were also lower in this area and the remaining ones were from the sales of older homes. Keurboomstrand was the number two suburb with 15 sales, followed by Bowtie with 13 sales and Sea Side Longships with eight sales

Property snippets from rest of South Africa:

A Silver Lining

The residential property market in South Africa is on the precipice of better times, and it is ready for a shakeup after a few trying years, said Rhys Dyer, CEO of the Ooba Group. The South African residential property market sector is in a rut but is poised for a gradual recovery he told Business Tech.

According to the Q1 '24 barometer his company publishes, the higher for longer interest rate environment has impacted home loan application volumes for the quarter.

"However, resilient South Africans will likely be rewarded by predicted rate cuts towards the end of 2024," said Dyer.

In Q1 '24, the volume of home loan applications processed were down by 9% from Q1 '23 and down 25% from Q1 '22."

"However, we saw an 8% increase in application volumes in Q1 '24 compared to Q4 '23, and there is definitely more activity in the market."

In addition, the average price of properties originated through Ooba trended upwards, growing 3.1% year-on-year across both the first-time and national property price categories.

"The expected rate cuts later this year combined with elevated bank approval rates and competitive property prices make right now the perfect time to get a foot on the property ladder," said Dyer.

Harsh Monetary Policy

In a recent article in Business Tech economist Roelof Botha, who teaches part time at the Gordon Institute of Business Science (GIBS) and is the Economic Advisor to the Optimum Financial Services Group, said South Africans are paying the cost of an unnecessarily harsh monetary policy, which is costing households R4 000 a month, at least.

Botha highlighted that this additional cost could have been spent on goods and services, which could have stimulated the economy and created more jobs.

The South African Reserve Bank's Monetary Policy Committee (MPC) began its current hiking cycle in November 2021, after observing an upward trend in the country's inflation.

Since then, the South African Reserve Bank has increased interest rates by a total of 475 basis points. Currently, the repo rate is at a 14-year high of 8.25% and the prime lending rate is at 11.75%.

The latest inflation rate for March was 5.3%, according to the Consumer Price Index (CPI).

Middle Class Wealth

In the last three years house price growth has been beneath that of inflation, according to an article in Moneyweb on April 25.

Data from the Bank for International Settlements via the St Louis Fed's FRED (Federal Reserve Economic Data) tool shows just how stark the decline has been. 

A stuttering economy, interest rates at multi-decade highs, load shedding, and emigration sales above their long-term average mean a struggling residential property market, said Moneyweb. 

For many middle-class South Africans, the majority of their wealth is tied up in their physical property and retirement savings (typically a pension fund or retirement annuity). 

With primary residences, the theory has always been that nearer retirement, they'd be able to 'bank' the equity from their paid-off homes and downscale, with the difference ('profit') being used to supplement their existing retirement savings. 

But if that R3 million house is no longer worth the R5m it was expected to be, the disparity - especially for those close to retirement - could be near-catastrophic.