The top end of the property market is pulling its money out of Gauteng and either investing in the Western Cape or moving it offshore, warns Seeff, one of South Africa’s leading estate agencies.

Long viewed as an indicator of investment appetite, buyers are shunning Johannesburg’s failing infrastructure and municipal chaos and instead opting for Cape Town, where property sales are twice that of the former world-class African city.

But Samuel Seeff, chairperson of the Seeff Property Group, said the wealthy are spending less than in previous years — even in the Cape, with the balance potentially invested offshore.

The experience of the top end of the market, he said, is a “canary in the coal mine”, reflecting what is happening with investment in the country, because despite two exceptionally good property years, the upper price limits have stagnated in Johannesburg.

A recent report for Seeff by market intelligence agency Lightstone reflects slowing sales in the R10-million-and-above bands in both Cape Town and Johannesburg/Sandton, with the upper end of the market grinding to a halt.

Still, Cape Town — a more expensive and coveted housing market — has sold 61% more than Johannesburg in the R5-million to R10-million band (1,808 vs 886), and a whopping 235% more in the R20-million-plus band (127 vs 24).

Record sales

Seeff said despite the record number of sales above R20-million in the 2022 financial year in the Cape Town Metro, the upper price limits have remained more or less the same as they were five years ago, adding that more properties sold above R20-million in Stellenbosch (10 sales with a combined value of about R330.6-million) in the past year compared with Sandton/Johannesburg, where just seven sales worth less than R194-million in total were recorded.

In Cape Town, there were “a handful” of sales above R50-million, with fewer than a third on the Atlantic Seaboard purchased by international buyers. Contrast this with record prices in previous years — a flat fetching R72-million and a Bantry Bay home selling for an astonishing R290-million.

Statistics SA’s latest data for the private sector reveal a blooming building sector in the Western Cape: the province approved building plans worth almost R35-billion (up from R27.4-billion in 2022, a 27.4% increase year-on-year), whereas Gauteng declined by 0.3% year-on-year from R33.358-billion to R33.243-billion.

The value of building plans passed (at current prices) increased by 8.1% (R8-billion) during January to November 2022 compared with the same period in 2021.

Increases were recorded for additions and alterations (11.6% or R3.2-billion), non-residential buildings (10.8% or R1.8-billion) and residential buildings (5.5% or R3-billion). The largest contributions to the total increase were by the Western Cape (R7.4-billion) and Mpumalanga (R1.4-billion).

Cape outperforms other provinces

In December, FNB economist John Loos said the divergences, on a provincial basis, are most notably that the Western Cape was significantly outperforming Gauteng and KwaZulu-Natal.

“This outperformance is so significant that the Western Cape appears on track to have the largest share of residential building activity of the nine provinces for the first time in its recorded history.”

This was despite large variances in the size of the local economies: Cape Town’s total income for the 2020 to 2021 financial year was R43-billion, whereas the City of Johannesburg was R68-billion, according to the National Treasury’s Municipal Money project.

Loos added, though, that it was a myth that the Western Cape was the country’s biggest semigration destination.

“Gauteng is the biggest, because of its massive economy and population. But our various research over the years has pointed to the Western Cape having a stronger ‘net inflow’ of middle- to higher-income semigrants than any other province, ie the inflow exceeds the outflow.

“In Gauteng’s case, the gross inflow is likely [to be] far bigger than that of the Western Cape, but its outflow is bigger than its inflow, causing a net outflow of ‘semigrants’ from that province for much of the time, it would appear.” DM168

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.