KwaZulu Natal, South Africa’s Best Kept Secret
South African Housing Market Today
Over the past three years, the KwaZulu Natal property market has enjoyed unparalleled growth, outperforming other provinces as an investment destination. And yet, it is still considered one of the best-kept secrets in the country.
According to the Pam Golding Residential Property Index, South Africa’s house price inflation continues to rebound, rising from a low of 2.5% in April 2019 to 4.1% in February 2021 and promisingly, the recovery in prices is showing no sign of losing momentum. KwaZulu-Natal still leads the recovery with +5.4% in February 2021, followed by Gauteng (+4.8%) and the Western Cape (+4.7%).
Noteworthy especially for first-time buyers, and according to the Pam Golding Residential Property Index, lower-end prices (<R1 million) have been on an upward trend since mid-2020, reaching 6.8% from year-earlier levels in February 2021, says Dr Andrew Golding.
Latest Trends in the Market
Trust Urban Housing Finance (TUHF) Regional Manager for KZN and Free State, Sershin Moodley believes three major trends have the potential to significantly change the positioning of KZN and prepare the way for a marked investment in the province.
“Firstly, micro-units are becoming more popular as people are downsizing as a direct result of the economic impact of the COVID-19 pandemic. Secondly, many are looking for more communal living areas with their families instead of staying on the outskirts of the city. And finally, there is a short supply of quality student residential offerings in and around Durban. With the city becoming a hotspot for tertiary education, there will be a growing need to house out-of-towners around the universities,” says Moodley.
Golding adds, “Interestingly, while growth in freehold prices outperformed relative to sectional title units last year – perhaps influenced by the desire by many to relocate to more spacious properties as a result of the lockdown restrictions, the gap is now rapidly narrowing as growth in sectional title prices accelerates.”
The trend in KwaZulu-Natal over the past five years, with an average of over 42 000 properties sold per year (2015 to 2019), indicates a marked drop in registered sales for 2020. Hard lockdown took effect within the second quarter of the year, impacting the South African economy, and specifically the property industry’s ability to do business. As a result, pent-up demand due to the Covid-19 pandemic and restrictive lockdown measures will continue to impact trends, with average sales per year only expected to recover towards the end of 2021.
The latest property listings on Property24 show that two- and three-bedroom homes are most widely available. Some 39% of buyers interested in making KwaZulu-Natal their home are below the age of 49-years. While sellers in the area fall within the 50-64 years (33%) and 65-year and older (30%) age group.
For families who are downsizing, Wayne Paola from Harcourts Equity, says buyers are more likely to get a two-bedroom, two-bathroom apartment in Musgrave/Essenwood with two parking bays for R1.5 million. Possible to get closer to Brickfield for a townhouse for that price as well.
Glenwood Lower also offers a three-bedroom duplex with a garden and two parking bays in a secure complex close to schools and amenities for around R1.5 million.
Urbanisation drive, with a long-term view of the opportunities
Tying these three trends together is the fact that the urbanization of the CBD is expanding into other areas beyond Durban property. This, according to Moodley, means people are becoming more open to the potential of living, working, and playing in a centralized area.
Moodley indicates, “Even though some investors are cautious about the commercial property industry in the CBD due to subdued performance in recent years, it is essential to take a long-term view of the opportunities. Many large, listed organizations and investors who own properties in the CBD are either looking to sell or transform their building stock into residential or mixed-use developments.”
Entrepreneurs can capitalise on the new normal trends around remote working spurred on by the pandemic. For instance, companies in the CBD are considering sub-letting the large office space no longer required given how many employees are working from home.
“This opens the potential to convert these old office buildings into residential or mixed-use units. These commercial buildings have been built with large-scale occupancy in mind. Looking beyond possible first impressions based on the façade and physical appearance – such buildings can have the capacity to house up to 400 people, while adhering to safety regulation such as having fire escapes in place and adequate plumbing able to deal with this number. The large corporate buildings have had this in place since they were built so it presents a soft landing for investors looking to convert these into residential properties,” he says.
Furthermore, there is potential to take these properties and make them accessible to lower-income earning individuals and families and cater for a broader range of customers.
“It is about applying the work, life, play concept to be more inclusive to those that might traditionally have had difficulties in affording renting mixed-use properties. By expanding the base, it also creates more opportunities for local SMEs to be set up to create a self-sustaining ecosystem,” adds Moodley.
He indicates that KZN has an incredible amount to offer both from lifestyle living and business investment opportunities. It is an important geographic hub for the country, while in a post-COVID-19 landscape people will increasingly migrate to the coastal towns and cities to benefit from the quality of balanced lifestyle on offer, as concurred by transfer based data released by Lightstone in September 2020.
“In other coastal areas, cost of living may not be as accessible while weather fluctuations are quite extreme when compared to the affordability and year-long reliable climate of Durban. And when it comes to matching salary levels from other, traditionally wealthier parts of the country, Durban has grown in the past five years to come within 5% of what people earn in Johannesburg, for example,” says Moodley.
Companies in KZN are no longer afraid to pay for talent. Durban has already become one of the largest call centre hubs in the southern hemisphere. Furthermore, many specialist physicians are moving to the coastal towns and cities, with other professional people choosing to live at the coast and commute to Johannesburg for example.
“It comes down to the quality of life and the opportunities provided through a more innovative mixed-use property environment. With the repo rate being the lowest since the system was introduced in 1998 and the ability to find the right project at the right price, KZN will start attracting significant investor interest in the coming months,” says Moodley.