Lightstone data for the last year echoes Q2 data released by ooba, South Africa’s foremost home loan comparison service, which states that the average age of bond applicants is 39 years old. According to Lightstone, 83% of buyers in Sandton and Fourways are between the ages of 18 and 49 years, with the 36 – 49 age bracket making up 46% of the total number of buyers, as registered in the South African Deeds office. Moreover, almost 70% of sellers fall into this same age group. Most individuals who fall into this age range are first-time buyers, families, and young-to-middle-aged investors.
Sandton is one of Gauteng’s wealthiest areas and boasts some of the city’s most sought-after suburbs. It stretches 143,5 km², the heart of South Africa’s financial district, and includes suburbs such as Morningside, Illovo, Rosebank, Lone Hill, Bryanston, Fourways, Witkoppen, Sunninghill and Woodmead. Sandton offers some of the most prestigious retail and leisure experiences in Africa, including the multiple award-winning Sandton City, newly refurbished Fourways Mall (now the second largest retailer in the country), and Monte Casino, as well as Michelin-style restaurants, boutique stores, renowned art galleries, multinational business giants, and the Gautrain metro station.
Sandton Property Landscape:
Sandton is home to a vast and diverse selection of sectional title and freehold properties - from historic freehold homes and modern clusters in luxury lifestyle estates to high-rise executive apartments in some of the city’s most prestigious buildings. It offers a high level of comfort and luxury that complement the sophisticated lifestyles of mid to high-income households. In the last 12 months, sectional title properties in the R800 001-R1 500 000 price bracket have had the highest number of sales, at 1890, followed closely by sectional title property between R1 500 001 and R3 million, at 1090 – accounting for 75% of the total number for sectional title transactions. The number of sectional title property sold in these two value bands make up 42% of the total number of properties sold in the last year. This makes this property type the most popular in the area, with an average selling price of R1 441 000 – making it an accessible option for first-time buyers and market entrants. Currently, 69% of the properties listed for sale in Sandton on Property24 are for sectional title properties. It stands to reason then that the total number of sectional title property available in a specific area is significantly higher than freehold property, and this contributes to the higher number of sectional title sales. That said, the proverbial “sweet spot” for sales property is and has been around the R1 million mark, and this is evidenced in the high number of transactions in that value bracket.
Freehold Property:
The number of sales transactions for freehold properties in an estate priced R1 500 001 - R3 million (1006) and over R3 million (1029) outperformed regular freestanding homes in the same price categories – 226 and 393 respectively. Given the large number of sales its evident that security and lifestyle estates are highly sought-after in this area and buyers are willing to pay a premium for the exclusive access to amenities and state-of-the-art security that estate living has to offer. That said, the average selling price for freehold property in Sandton is significantly higher when compared to freehold homes in estates - R4 257 000 in comparison to R3 655 000. To put it in perspective, on Property24 there are more than 400 properties listed as for sale in Sandton above R10 million. 74% are freestanding homes, with the highest, a 7-bedroom house in Sandhurst, asking R150 million. In comparison, the most expensive freehold properties in estates are listed at a third of that price. With high value freehold properties of this calibre raising the average selling price, the value of free-standing homes in Sandton is unsurprisingly higher than freehold homes in estates.
Price Growth and Number of Property Sales:
The property type with the largest number of property sales (based on registrations) is sectional title property. However, in comparison with freehold property and vacant land, sectional title property has had the lowest growth in average property price in the year to date, at 2.65%, compared to 2021 figures. Lightstone data reveals that the median price for sectional title property (R1 200 000) for the year so far (based on property registrations) has already surpassed those for the full 2021 year. The average property price for freehold property has increased by 6.9%, a significant improvement from 2021 figures. Vacant land has grown by a staggering 25%, 5 times the average of sectional title and freehold property. This is not surprising given the number of developments going up in Sandton and surrounds, the scarcity of vacant land, and the premium price developers will pay for a prime position. According to Lightstone, a total number of 7100 sectional title and freehold property sales have registered in the Deeds Office. The lower number of sales for 2022 (in comparison with 2021 figures) could be attributed to the fact that the data for 2022 represents only three-quarters of the year. That said, the current economic climate, aggravated by rolling blackouts, rising interest rates, higher living costs and geopolitical tension, has dampened demand and weakened affordability.
Number of Property Sales to Continue Growing:
Spring and summer are the selling seasons, and our sales specialists predict that the number of sales will continue to climb as the year draws to a close. While affordability has impacted the number of bond applicants in the last year, and therefore the number of registered sales, fewer applicants means that competition for business between the major banks has resulted in strong interest rate discounts and lower deposit requirements for qualified buyers with good credit records. Sandton offers the premier executive lifestyle aspirant buyers dream of living! Competitively priced sales property in a sought-after suburb like Sandton will sell!
Average Listing Price of Properties Currently for Sale in Sandton (as listed on Property24.com):
Property24 compiled data on the average listing price of properties currently for sale in Sandton, by number of bedrooms. The asking price is directly impacted by the type of property, age of building/property, condition, and size of the property, as well as prevailing market conditions. In September alone, 15 306 properties were listed as for sale on Property24. 2 Bedroom (4 868) and 3 bedroom (3 571) properties made up the largest proportion of listings – 55% of the total number of listings for September.
According to Property24 Listings for 2022, the average selling price is R400 000 lower than the asking price. This confirms that the residential sales landscape remains a buyer’s market and is expected to remain so for the foreseeable future. Sellers need to bear in mind that an oversupply of sales property, aggravated by desperate sellers accepting lower offers, and a smaller pool of qualified buyers, affords the aspirant homeowner strong purchasing power. Sales property will need to be competitively priced if it is to have a hope of selling timeously. However, while the current rate hiking cycle has placed household finances under increasing pressure, prime remains well below pre-pandemic levels and the banks’ approval rates remain steady. The local housing market is expected to remain resilient.
Tenants in the Higher Rental Value Brackets (Good Standing and Vacancy Rate):
TPN’s Residential Rental Monitor for Q1 showed that tenants in the higher rental value brackets (R12 000 – R25 000+) typical of the Sandton area, represent the 8% of the residential rental market still in good standing. That is, paying their rental in full and on time/within the grace period. This value band continued to see improvement in good standing over the last several quarters, despite inflationary pressures and rising living costs whittling away at financial buffers. Likewise, the TPN Vacancy Rate has shown promising recovery and is forecast to show further improvement in Q2. According to TPN, rental properties between R12 000 and R25 000 had a vacancy rate only marginally higher than the R7 000 – R12 000 rental bracket, with the lowest vacancy rate (7.77% vs. 7.32%). High-value rentals have a vacancy rate lower than the national average of 8.26%.
Landlords with properties in the mid- to high-value brackets are not exempt from the risk of poorly performing tenants. In fact, these tenants often have a higher percentage of their salaries going towards debt obligations and nondiscretionary spending, and so will be hard hit by the higher cost of borrowing. While inflationary pressure may force homeowners to implement rental increases to remain abreast of escalating costs, conservative rental escalations may be the difference between keeping a paying tenant and filling a vacant property. South African consumers are facing a cost-of-living crisis spurred by rising food and fuel costs, and TPN predicts that getting rental payments in on time and in full is likely to be a challenge going forward.
Interestingly, the percentage of bond applications for investment and rental purposes, according to ooba’s Q2 data, has risen to 7.21% - the highest percentage recorded since 2010. In the wake of the Covid-19 pandemic and other geo-political tensions, investment buyers are taking advantage of the still relatively low cost of borrowing to establish or expand on their investment portfolios.
Property for Investment and Rental Purposes:
In TPN’s Investor Report, the credit bureaux give an overview of the rental increase and decrease trends in Sandton with regards to rental price. Sectional title property in the expansive Sandton area has seen a marked decrease in rental prices, particularly areas like Woodmead, Riverclub and Sandhurst. Magaliessig, Paulshof, Sunninghill, Lonehill and Witkoppen show little to no change in rental prices. The average gross yield for sectional title property in Sandton is largely on par with the national average. However, according to the Rode’s Report on the SA Property Market, rentals are still declining in real terms. The costs to the landlord (rates, taxes, and maintenance), as well as higher bond instalments, are rising faster than their rental income.
Rental price trends for freehold property appear more area specific, with suburbs like Bryanston, Buccleuch, Woodmead, River Club and Witkoppen experiencing positive rental price increases while other areas like Fourways, Lone Hill, Morningside and Sandton Central show significant rental decreases (more than 10%). The average gross yield for freehold property in Sandton has sunk almost 2% below the national average.
Sandton Rental Yield:
It appears that Sandton landlords have had to curb rental escalations to keep paying tenants. This is reflected in TPN’s Rental Payment Index which shows that on average the rental payment trends for Sandton are positive, with most suburbs more than 5% above the national good standing index. Tenants in good standing refers to the percentage of tenants who have settled their rental account at the end of each month in full – this includes tenants who have paid within the grace period and tenants who have paid late. The national average for residential tenants in good standing in Q1 of 2022 was 81.68%, marginally lower than Q4 of 2021. 70.19% of tenants in the Sandton area paid on time and in full. A further 2.76% of tenants paid within the grace period, and 8.08% paid late. According to TPN’s data, 11.61% of tenants in Sandton did not pay their rent, slightly higher than the national average of 7.03%. TPN reports that tenants in the mid- to high market bands (spending R12 000 or more on rent) represent the smallest portion of the rental market (8%) but are the only category seeing some improvement in good standing.
In summary, rising interest rates may positively impact rental demand for competitively priced rental property. This is reflected in TPN’s higher Market Strength indices and lower Vacancy Rate. However, TPN cautions that while Sandton has experienced improvement in rental payment performance and tenant activity, “increased demand may not necessarily translate into improved escalations”. According to the Rode’s Report on the SA Property Market, rentals are still declining in real terms. Inflationary pressure will continue to drive up the costs to the landlord (rates, taxes, maintenance, and bond repayment), and rental income is not predicted to keep pace. Landlords should partner with a professional property practitioner they can trust to apply strict screening criteria to new tenant placements because affordability constraints put tenants at risk of defaulting. Despite Sandton tenants’ positive payment performance, tenants in the mid- to high-value brackets are not exempt from defaulting on their monthly rental payments. In fact, these tenants often have a higher percentage of their salaries going towards debt obligations and nondiscretionary spending. TPN cautions that rising food and fuel prices will continue to have a significant impact on the cost of living for consumers, and affordability concerns will increasingly affect tenants’ ability to pay in full and on time. Landlords will need to be sensitive to the fact that tenants will also be under significant financial strain and that an unreasonable increase may force them to find a more affordable rental option.
