Plett Property Market Review 2020-08-12
Record sales are being recorded in residential property sales in Plettenberg Bay since the hard Covid-19 lockdown moved to the less strenuous level 3 on 1 June 2020. Statistics for 2020 are hard to come by as the deeds office has only released pre-lockdown registration figures to date. However, a few Plett estate agencies recorded their best-ever sales for the month July. The rebound after the lockdown is despite the current economic climate and is not the result of a decline in price, but rather due to demand that was pent up over the lockdown and the decreased interest rates. From initial discussions with estate agents it appears that prices are remaining level overall, but some properties have achieved full asking prices after being on the market for a relatively long time, with two R40million+ properties included.
Over the past twelve years average prices in Plett have remained relatively constant, and the average for 2008 and 2019 are both around R2,24million. Of note is that sales of vacant land have increased substantially over this time, so this would bring the average down overall, so there would have been an increase overall for individual houses and apartments.
Local estate agents were somewhat surprised by the current high levels of demand and are cautiously optimistic about the future. They report that they had record years from 2016 to 2018, but that sales in 2019 decreased dramatically in relation to 2018 figures. 2020 seemed to be following suit, then there were almost no sales during the hard lockdown, but since then activity has been similar to that of the peak summer season.
Economists are not as optimistic. Although some time ago now, on 19 June 2020 I attended a seminar held by the South African Institute of Valuers titled: Economic Outlook: Property Insights and Forecast Amid Covid-19 given by John Loos (FNB Economist in Commercial Property Finance). Mr Loos stated the following: The national economy was already in a recession at the end of 2019 (-1%) and due to the Covid-19 lockdown this is expected to decline to -8%. In comparison, the 2009 crash was from +5% to -1%. He noted that -8% is worse than the Great Depression, and expectations are a 15% to 20% decline in a few years (similar to 2009). As the property market is slow to react, it won’t happen immediately and there will probably be an oversupplied market for a couple of years. It should take a year or two to recover, but that will be to the 2019 level with a stagnant economy, where the structural problems (increased government debt, electricity supply, overspending on under-performing government entities, etc.) have not been resolved. A survey was conducted among the valuers present and the majority (61%) saying recovery would be long term, and most of the rest medium term (37%). In a separate seminar, Tracey Myers (Senior Valuer from Standard Bank) said that there would be a decline of 10% to 20% for commercial property over the next two years, and Malusi Mthuli (Head of Valuation: FNB Commercial Property Finance) expected a 20% decrease over the next 2 years.
Plettenberg Bay is a coastal resort town with a fairly small economy. The town had approximately 31,800 residents at last census (2011) and continues to grow at a rate considerably above the national average. There is currently a semigration trend, with many people Gauteng and KwaZulu/Natal moving to the Western Cape. The virus has not changed this and, if anything, has strengthened it. This leads to a situation where demand and therefore property prices are well above national averages even though affordability is relatively low. While Plettenberg Bay may perform better than average, it is unlikely to escape the decline in the economy unscathed. This implies that there will be downward pressure on values in the medium term. It is possible for demand to outstrip this. What is certain is that there is an abnormally high level of uncertainty in the property market. These are interesting times for property values!
Due to the lack of statistics for 2020, I am looking at the trends leading up it. Residential property selling prices were under pressure because the number of sales had steadily declined over the previous 3 years. The number of sales declined from 2016 to 2017 by -11% (528 to 470 sales), then a further -13% in 2018 (411 sales). 325 sales in 2019 sold and were registered at date of writing; this number will increase as more 2019 sales register over the coming months, but all indications are that it will be a further substantial decline in the number of units sold and probably the biggest decrease since 2016.
Although one would expect a large decline in prices as a result of the decline in number of sales and total value, average residential property prices have taken long to start adjusting and have, to date, only seen a relatively small decline. Average prices increased from the low in 2016 to 2018 by about 23% (from R1,97million to ±R2,42million), leveled out in 2018 and then declined by ±3% in 2019.
Plettenberg Bay broke the R1billion mark in 2016 and 2017; 2018 fell just short of this, and it looks like 2019 will be substantially lower. Looking at the trends in the graphs, we entered 2020 in a downturn.
Entry level asking prices within Plett remained relatively stable. Sectional title unit prices start at R750,000. Vacant land starts at about R250,000 in gated estates and R425,000 in open areas. There are cheaper options in areas surrounding Plett.
Top current publicised asking prices for properties on the market are as follows: R67million for a Beachy Head Drive beachfront home on a double plot, R60million for large vacant rural land (with possible future development potential), R26,7million for vacant residential beachfront land in a gated estate, and R7million for apartments. Top prices obviously fluctuate considerably depending on what is on the market at the time.
Hein Pretorius, Broker Principal of Sotheby’s International Realty Plettenberg Bay, sold the highest price residential properties for the past 3 years (2018: vacant land in Robberg Beach End for R35million and 2019: R30million for an upmarket beachfront home in Alguada Reef Road; 2020: R44million for a beachfront home in a gated estate). Over the past few years there have been a number of sales on Beachy Head Drive over R30million where houses were demolished to make way for new homes. The highest was R36million in 2017. However, in January 2020 a similar site sold for R25million. For apartments, the highest price in 2019 so far is R7million in The Sanctuary One and in 2018 it was R9,9million in De Meermin. The historical record price for residential property remains unchanged and has been held since 2006 by Hein Pretorius at R50million for a luxury coastal estate.
Pretorius says: “After a good run, the market turned in early 2020 and then disaster struck due to the lockdown. We were pleasantly surprised by the dramatic increase after lockdown was eased. We had our best July to date and I was fortunate enough to have sold a home on Robberg Beach for R44million and another house was sold privately close by for R40million, both at full asking prices and with multiple interested buyers in that price range. Sotheby’s International Realty had an increase of 41% for the month of June nationally and our competitors are also reporting record sales. Homeloan applications have increased and website traffic is back to normal.”
“One must bear in mind that there was pent up demand, and negotiations are tough now, but we are seeing that many people still want to move to or own property in our beautiful town. I think that Covid-19 has caused a lot of people to introspect and re-evaluate their priorities, which has led to the current influx. Plett is truly a special place to visit or live, which, in property terms, translates into one of the best performing markets in the country.”
“In 2012 we had over 1000 properties listed for sale. This declined to the 600s in 2017 and is now climbing again. We currently have around 774 properties listed.”
“It is a good time to sell if you are thinking of selling as you can achieve a realistic, fair asking price and it is uncertain as to what you will achieve in future. Regardless of uncertainty, it is also a good time to buy as the interest rates are low and asking prices have been fairly stable recently, and in the long term Plett will retain its popularity. There are still excellent value properties available.”
In the towns surrounding Plett there are normally very few sales, so statistics need to be seen in context and treated with some circumspection. In Wittedrift 13 properties transferred in 2018 for an average of R772,000 (a record number of sales, but averages were down from 2015 & 2016); in 2019 seven properties registered for an average of R863,000. In Keurbooms proper (main town) four properties transferred in 2018 for an average of R7,86million, the highest being R9,75million for an older beachfront home; in 2019 ten properties transferred for an average of R4,4million. Natures Valley saw averages of R3,8million in 2018 with 12 registered properties and 2019 saw four properties register for an average of R3,6million.
The figures above were taken from deeds information on the 12th of August 2020. Sales for Plett are listed by date of sale, not transfer date, to provide a more accurate depiction of the market. Rural property, sales below R100 000, known non-arm’s length transactions and duplications (e.g. when a developer buys numerous properties for a single price and each is listed at the full price, only the single figure is taken), and outlying areas are not included in the figures. A number of sales are still in the registration process, so the statistics and graphs for the last year (2019) in particular will change substantially in future.
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