One area in South Africa where property can do better than the Western Cape

The Western Cape has seen a notable influx of property sales driven by semigration increases and people seeking better lifestyles. However, buying property in KwaZulu-Natal could offer better value for investors in the long term.

This was explained on Investec’s Everything Counts podcast by Hayley Ivins-Downes, Managing Executive for Real Estate at Lightstone Property.

The Western Cape has seen a surge of buyers moving into the province, driving property prices to levels even higher than before the Covid-19 pandemic, Ivins-Downes said.

Cape Town, in particular, created its own property bubble, but prices began to stabilise just before the pandemic. Now, with the influx of new residents, property values have risen again.

High demand for property in the Western Cape has been driven by a number of factors. 

It offers the benefits of living in a big city – including proximity to an airport, sought-after schools and good infrastructure – while maintaining the appeal of coastal living.  

“People will continue to move to areas where things work, resulting in semigration for household and business activities,” John Loos said in FNB’s 2024 property insights analysis.

According to Property24, the area’s popularity is reflected in its surging property prices, increasing from an average selling price of R935,000 in 2015 to over R1.6 million in 2024.

Rental prices in the province have also surged over recent years. According to PayProp, the Western Cape has had the highest rents in South Africa since 2016, and in Q2 2024, the average rent stood at R10,673. 

When purchasing property in the Western Cape, affordability is key, Ivins-Downes explained. 

For instance, the value of a four-bedroom home in Johannesburg or Pretoria might only get you a two or three-bedroom property in the Western Cape. 

However, while the Western Cape may have experienced a property boom over the last few years, other areas have seen declining interest. 

KwaZulu-Natal

Ivins-Downes said that the situation in KwaZulu-Natal (KZN), specifically, has been interesting to watch.

Before Covid-19, KZN’s property index was around 4.9%, but it has dropped significantly, now sitting at just 0.3%, indicating a reduced appetite for property in the area.

This decline in the area’s property index is the result of several challenges the region has faced, including political issues, a decline in tourism, and flooding. 

Severe weather events, in particular, have plagued the province. 

In 2023, Old Mutual Insure reported ten weather-related claims, three of which were in KZN. This includes the Empangeni Richards Bay hailstorm in April, the Durban storm from June/July, and the Ladysmith hailstorm in September.

This excludes a countrywide storm which lasted for a week in February. 

These weather events have resulted in an uptick in property damage, even driving some insurers to pull out of the area. 

Notably, though, the Western Cape experienced the same number and duration of severe weather events as KZN.

“However, you know what they always say is that when people are scared, it’s when you need to invest,” Ivins-Downes said. 

This presents an opportunity in KZN for those seeking to buy property or diversify their portfolio.  

Rental prices in the province already point to a potential turnaround. 

PayProp’s Rental Index for the second quarter of 2024 explained that, at first glance, KZN’s residential rental market performed poorly in Q2 2024. 

KZN had a rental growth of only 1.5%, the lowest of any province, with rents increasing by just R128 year on year to reach R8,945.

“KZN has been one of the net losers from South Africa’s semigration trend, reducing demand for rental homes,” the report explained.

However, in Q1, KZN rents decreased by 0.4%, making its 1.5% growth in Q2 the second-best quarter-to-quarter swing in the country.

“Don’t celebrate yet, but this could be the start of a recovery,” PayProp said.

“So definitely consider looking at what you can afford and purchase there,” Ivins-Downes concluded.