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At the Cape, says Anton du Plessis, Chief Executive of Vineyard Estates, winter almost invariably ushers in a period of slow residential property selling – and already this year the pattern is beginning to repeat itself.

This, he says, follows on from a four month period in which upper middle and upper bracket property attracted fewer buyers than would normally be expected.

“Those of us who specialise in the higher end properties,” he says, “are seeing unsold stock build up.  Homes valued at above R4 million are now moving slowly and those over R10 million even slower.”

In the areas in which he is most active (Newlands Upper through to Bishopscourt and Kenilworth Upper/Wynberg), says du Plessis, there have only been 21 transfers of residential homes this year – at a median price of R6 million per sale and averaging out at R6 100 per square metre of land.  This average price, he adds, might seem high to some, but it is on the same level as 2006/2007 prices.  This, he said, reflects the absence of high end sales which push up the averages.

“A home selling in the R5 million to R10 million probably will go between 10 to 15% below previous peak levels, while sellers with properties valued at above R10 million will probably have to reconcile themselves to a 20% drop,” said du Plessis.

For buyers with resources or the ability to raise a bond, the current period, he adds, represents an excellent time to scale up because whatever they ‘lose’ on their present homes they will more than make up on their new purchases.  Those scaling down will have to accept a lower price than they could have achieved two to three years ago – but will also find that their new, probably smaller home’s price has been downgraded, although to a lesser degree.  In the R3 million to R5 million bracket, he says, the drop on previous prices is only about 7 to 10%.

What should encourage investors in his areas, adds du Plessis, is that average returns on rentals this year have improved from just over 4,5% to 5,5% or more – and seem set to rise further in the next 12 months when buyers drop their “wait-and-see” approach.

“Right now,” he says, “very few middle and upper bracket areas in Greater Cape Town are showing noticeable capital growth.  However, it is significant that the latest national figures show very definitely increased values in the sub R1 million price category, i.e. from R300,000 to R1 million.  Experience has shown that the more expensive properties rise in price about a year to 18 months after the lower bracket prices begin to show increases.”

The current situation, adds du Plessis, is complicated by the definite possibility of a second global recessionary dip sparked off by the USA’s and Europe’s economic difficulties, which, he says, are too serious to be ‘solved in a hurry’.

“As I have said before,” said du Plessis, “the property market in South Africa is not isolated from these global difficulties.  Nevertheless, as I have also indicated previously, for those adopting a long term view this is a good time to be investing in more expensive Cape Peninsula homes, which have over the years have always outperformed the market as a whole in South Africa.”