A real look at Cape Town house prices (amid Eskom woes)

The recent release of the Cape Town 2018 general valuation roll that indicates an average house price growth of 34% over the last three years, has infuriated numerous property owners and has been met with some scepticism from the local property sector who cite different statistics.

According to what is reported by the local property sector, although there are a few areas that have seen price growth of around 30% over the last three years as cited by the City, overall house prices have been dropping and the valuations are not in line with current market value. The general outlook forward is that demand will remain flat till the elections in May at least, and for some time even after that due to the slow economy. Eskom's current crisis to supply in the country's power needs isn't improving the outlook for the property sector, except perhaps for houses or sectional title properties equipped with generators or solar panels which makes them more appealing to home buyers, especially in the luxury market.

The city's general valuation roll is published every three years by the City and is according to a public statement by the City compiled using "internationally recognised methodology and tools". The 2018 valuation roll was released in March but homeowners were notified in February so they could inspect the roll and raise objections if they disagreed. Objections can be submitted until 30 April 2019.

Indeed, objections have since been pouring in, also at the offices of local estate agents. According to Lance Cohen, luxury market specialist for Seeff Atlantic Seaboard, he has been inundated with disgruntled homeowners, some who report their property values have increased by an average of 50%-70% on the 2015 roll.

"This is highly inaccurate as we have in fact seen a drop in values of 20%-25% over the last 12 months and the current values are in fact not far off what they were in 2015," says Cohen.

Lisa Connellan, Sales Manager at Knight Frank SA (Residential), says he would also be on the side of scepticism as they are finding the majority of recent municipal valuations are considerably higher than actual market value.

"The general market has been in a depressed state for 18 months. Whilst growth has been stunted, certain suburbs saw higher levels of registered sales which includes Rondebosch as an example," explains Connellan.

Pola and Nadine Jocum, agents with Seeff Camps Bay reports that most of the Camps Bay municipal valuations have increased by between 50%-120% while in reality prices have generally gone down or stayed the same in the 2018-March 2019 period. They have consequently also been inundated with homeowners asking for their assistance.

Doris Rickets, an agent with Seeff City Bowl, says their office has also been overwhelmed with objections, with one of their clients that had an increase from R4.1m to R16 and another R3.9m to R10.9m. "There has been no consistency with valuations," she says adding that there certainly hasn't been an increase of 34%. "The fact remains that the market has declined since mid-2017 with prices currently being achieved similar to those of 2016 if not less."

Gary Grobbelaar, CEO Seeff False Bay & South Eastern Suburbs, says they have had a flood of people asking for assistance who have serious concerns that their property values are being overstated.

Pierre Germishuys, MD for Seeff Brackenfell, Winelands/Boland, West Coast and Port Elizabeth, says in their areas they are finding very little, if any, the correlation between the current municipal valuations and sales prices, even in the same suburbs.

As mentioned with Rondebosch, there are a few exceptions where price growth did closely match that of around 34%. These include the luxury sectional title sector on the Atlantic seaboard and Pinelands. JP Rickets, sectional title agent with Seeff City Bowl, also report that in the last couple of years there have been tremendous growth in the City Bowl, CBD and De Waterkant areas, but says the market is now quiet with prices in some instances dropping by 20% down to 2016 levels.

"This has impacted municipal valuations which has not taken this into account and the valuations presented to property owners are therefore now higher than the current market value. While there are exceptions, many property owners are sitting with inaccurate valuations," Rickets says.

He explains that historically, the municipal values were quite low, i.e. lower than the market value at the time, so this has had an impact on the current valuations, where people are seeing increases between 50% and 75% from their previous valuations. While the market hasn't increased by this much in the last 3 years, most of the previous valuations were well below market value.

Going forward most agents expect the market to remain flat until after the elections in May, where depending on the outcome price growth could follow but it will take time to recover.

Reflecting on the impact of the crisis in restoring electricity supply, Cohen says he believes this will result in a further decline in the demand for houses, resulting in a further decline in price. This is except for houses equipped with generators or solar power, which are added attractions especially in the luxury market reports

Doris Rickets says their overseas buyers are losing faith in investment value due to the Eskom debacle. On the positive side, they are also seeing more interest in homebuyers who want to live off the grid.

Pauline Hareb, sales manager for Seeff Pinelands, says they are seeing that sectional title blocks with electricity generators and back-up water supplies are favoured.

Ending with a glimmer of hope, the last word comes from Germishuys: "Yes, even with the Eskom woes, South Africans tend to be an optimistic lot...if only Eskom (definitely not ESKOM)) can get their act together, there will be a new wave of optimism in South Africa.