The property boom that Hermanus has seen over the past nine years has ended abruptly. While growth of more than 18% was at the order of the day for the past five years, the average price for a freehold property has declined by 15% over the past year, according to property specialists in town.
With the traditional summer home sale season fast approaching, real estate companies are wary over what can be expected over the coming months.
“If prediction were easy, we would all be making money. But fortune-telling aside, the only economic fact that we can rely on is that the housing market moves in cycles. All cycles have good and bad years, but some of these cycles have really high or really low outliers. The last twelve months have been a low outlier,” says Stephen de Stadler, Managing Director of Fine & Country Hermanus, Arabella and Kleinmond.
“Following a high of almost 1 170 property registrations for Hermanus in 2018 (which was already a decline over the previous two years), this year up to the end of August has shown just over 450. In addition, the average price of freehold property sold reduced by 15% from 2017 to 2018, reflecting the fact that many new freehold housing developments were sold during 2018,” he says.
According to De Stadler, average selling prices in Hermanus should not be used as a yardstick, as the expected sales price in individual suburbs can differ considerably.
“We know that the local unrest, the lead into the elections and a lack of clear direction on the political and economic front have negatively affected the market, but an analysis of actual sales shows a common theme. The properties that are selling are correctly priced for the current market. In this classic buyer’s market, sellers need to temper their price expectations. As we head into the so-called season for Hermanus, we are already seeing increased activity from potential buyers and we are cautiously optimistic that the next quarter will show an improvement over the previous two,” says De Stadler.
Dean Meijer of Chas Everitt says the size of the local property market has declined from R3,2 billion to R1,86 billion. “While there has been a small uptick, it is safe to say that the local property bubble has burst. While many sellers are still expecting to achieve the same prices of a year or two ago, we are warning potential sellers to think carefully before placing their properties on the market. In many instances we are seeing sellers struggling to break even.”
It is not only the local unrest we experienced last year that is affecting the local market. Every time there is unrest on the N2, be it at Bot River, Grabouw or Somerset West, we see fewer buyers coming to the area. Many people who visited Hermanus for short breakaways over weekends became property owners here. But now they are going to the West Coast or further afield on the South Coast and buying investment properties there,” says Meijer.
This sentiment is echoed by Nicola Lloyd of Pam Golding. “Other towns on the South Coast are offering better value for money than Hermanus. Although we are showing a lot of houses, we are seeing potential investors opting not to buy here as sellers are unwilling to lower their prices.
“Because of the inflated prices, many properties are on the market for months or even years and this furthers the negative perception about property investment in Hermanus. We are advising sellers that expecting prices that were reached even as recently as last December is unrealistic,” says Lloyd.
According to her, finding correctly priced property under the R3 million mark in Hermanus is next to impossible. “Properties that do come onto the market at the right price are quickly sold, sometimes even before they have been advertised.
“As we enter the traditional sales season, we are also seeing a slowdown in sales as many of the transactions are subject to the sale of a property, especially in Gauteng. Unfortunately, these properties are also not selling. So, part of what we are experiencing here is a knock-on from what is happening in the rest of the country,” says Lloyd.
Meijer says they are certain sales will increase over the holiday season. “If everything stays the same and especially if we do not have any more protest action, we expect a good season. In other towns in the Overberg we are also still doing brisk business,” he says.