Regional trends in the property sector showed that South Africa’s coastal nodes are still favoured, particularly the Western Cape, which has benefitted from ongoing strong demand while the sector as a whole has been struggling.
This was revealed in Balwin Properties’ latest results for the six months ended 31 August 2023, where, for the first time, the Western Cape was the largest contributor in number of apartments recognised in revenue.
The company said the Western Cape recorded 402 apartments in revenue in the period, growing its contribution to total apartments recognised in revenue to 48% compared to 35% in the first half of this year.
Balwin said demand for its Classic apartments at De-Aan-Zicht and Fynbos in Milnerton and The Huntsman in Somerset West remains strong.
It also recorded pleasing sales at Greenbay in Gordon’s Bay, the only Green Collection development in the Western Cape.
KwaZulu-Natal’s Izinga Eco Estate and Ballito Hills also contributed 153 apartments to revenue, representing 18% of apartments handed over.
The balance of 279 apartments handed over was within the Gauteng node, with Munyaka in Waterfall, Gauteng, continuing strong sales performance and maintaining its position as the main contributor in the region.
However, Gauteng’s contribution to apartments recognised in revenue, traditionally the group’s mainstay in number of apartments and revenue, contracted to 33% due to lower demand.
“Notwithstanding the positive impact of the semigration trend on demand for Balwin’s developments in the Western Cape and KwaZulu-Natal, management remains optimistic on the long-term sustained demand within Gauteng, which is expected to gradually improve as the market recovers,” the company said.
This has not only been a trend in the residential segment of South Africa’s property sector.
Johannesburg’s office market is also falling behind Cape Town due to a lack of economic growth, increased semigration, and rising administered costs for deteriorating service delivery.
Growthpoint highlighted this trend in their annual results for the year ended June 2023, with CEO Norbert Sasse saying the company could not keep up with demand for Cape Town properties.
Sasse said demand was driven by Independent Power Producers moving to Cape Town to develop head offices for their operations in South Africa.
“Cape Town has run out of office space. This is being driven by a combination of international businesses setting up offices in the Western Cape and semigration,” Sasse said.
The Western Cape government has previously said it was planning for about 500,000 people to move to the province in the short to medium term, indicating the scale of semigration.
On the other hand, Growthpoint’s Sandton portfolio continued to struggle with a high vacancy rate of 28% despite improvements in demand.
The company is heavily exposed to Gauteng as the province accounts for more than 70% of Growthpoint’s South African office portfolio.
Growthpoint wrote down the value of its Gauteng portfolio by almost 3% during the year, while its KwaZulu-Natal and Western Cape portfolios increased in value by more than 3%.
The company’s South African CEO, Estienne de Klerk, said Johannesburg still had a significant oversupply of offices.
This oversupply is compounded by the sharp increases in property rates in Gauteng and poor service delivery from local municipalities.
“The reality is you need economic growth. Growth at these pedestrian levels is making it a bit difficult, and Gauteng – no doubt – is disproportionately weak compared to the coastal areas,” said De Klerk.
He added that tenants could be driven back to Johannesburg as office space becomes increasingly expensive in Cape Town because of higher demand.