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FNB PROPERTY BAROMETER – INTER-PROVINCIAL MIGRATION TRENDS REVIEW
Western Cape continues to outperform the other 8 provinces in terms
of its ability to attract repeat home buyers from other provinces.
In services-dominant economies such as South Africa’s, the ability
to attract skilled labour is crucial, because skills drive such economies. As
such, an indicator of a country or region’s ability to attract and retain
skilled migrants is arguably one useful indicator of a region’s economic
competitiveness.” So says FNB Household Sector and Property Economist, John
Loos, adding that “we believe that looking at residential property transactions
can provide such an indicator of the competitiveness of SA’s different
regions”. To this effect, FNB has updated its Inter-Provincial Migration Trends
for 2011.
The review draws on information emanating from FNB’s Estate Agent
Survey, as well as from Deeds Office data analysis regarding repeat buyer
inter-provincial migration trends. Referring to the Estate Agent Survey, Loos
says that the results in major metros over the past year-and-a-half (since the
beginning of 2011) continue to point to relatively strong levels of long term
confidence being shown by the property sellers in the City of Cape Town.
“Make no mistake, Cape Town suffers a residential market mediocrity similar
to other major regions currently, which is a function of a weak global economy
and significant financial weakness in its household sector. “However”, says
Loos, “when it comes to indicators of long term confidence in the various regions,
Cape Town comes out generally better than the rest”. These indicators refer to
the level of emigration-related selling of property, “semi-gration”-related
selling and foreign buying in the region.
The city has the 2nd lowest emigration selling rate of the major
cities, i.e. 2.7% of total sellers selling in order to emigrate over the past 1.5
years, compared to the national average of 4%, according to the estimates of
the sample of agents surveyed. And when it comes to sellers selling in order to
re-locate to another part of SA (“semi-gration”), Cape Town is noticeably lower
than all of the other major cities with a percentage of 5.7% (National average
having been 8%). Agents estimates of the number of foreign buyers of a region’s
properties, expressed as a percentage of total buying, show Cape Town having a
higher percentage of foreign buyers than the rest of the major metros, i.e. 5%
since early-2011.
The study then delves into Deeds data to analyse the behavior of
repeat buyer migration. “For this purpose, we identify all purchases by
individuals where there is a corresponding sale by the same individual within
12 months either side of the purchase. It isn’t an exact science, as some
holiday property buying may “interfere”, while 1st time buyers who have
re-located do not get included into this figure. Nevertheless, we believe it to
be a good indicator of a large portion of semi-gration flows”.
Breaking it down by province, we found the Western Cape to have the
lowest outbound re-location rate of 10.7% of total repeat buyers, followed by
Gauteng with 14%, the 2 largest provincial economies. The smaller provinces had
the worst rates of outbound migration, with the highest estimated to be
Mpumalanga on 33.9% followed by the Northern Cape with 33.1%, which arguably
speaks to a lack of economic opportunity in these provinces.
On a net migration basis, i.e. repeat buyers entering a province
minus those departing, it was only the Western Cape that saw positive or “net
inward” migration to the tune of +9.7% of total repeat buying. Next best were
Eastern Cape and Gauteng with slight “net outbound” migration rates to the tune
of -0.4% and -0.6% respectively.
Clinton Martle, FNB’s Property Leader Strategist, based in Cape
Town, comments that the Western Cape’s 2011 net migration performance is very
much “more of the same”, with the province having had the best net inward
migration for the past decade or more. “This should be a key source of long
term support to the province’s economy, providing it with the potential to have
superior long term economic growth to most other regions”.
And according to Loos, StatsSA estimates for the 10 years from 2001
to 2010 show the Western Cape was indeed one of the star economic growth
performers, only slightly behind the top performing Gauteng, with an average
annual real economic growth rate of 3.77%, compared to Gauteng’s 3.91%, making
the country’s 2 major economies the top 2 growth performers.
He adds that “While Gauteng’s net migration rate of repeat buyers is
considerably weaker than the Western Cape, and even slightly weaker than the Eastern
Cape, we suspect that it probably has a superior inward migration rate of 1st
time buyers from other regions, made up of younger people starting out on their
career paths. We believe this probably to be the case because Gauteng remains
by far the largest economic region and thus the one with the greatest economic
opportunities.”
What seems clear from the study is that certain of the minor
provinces have very significant net outward migration rates, Mpumalanga being
the worst at -15.5% of total repeat buyers, suggesting steady skills losses in
those provinces. These smaller provinces may therefore find it increasingly
difficult to grow their economies and provide jobs in future.
Martle adds that the results of these findings have implications for
the Western Cape region. In order to retain its “net inward migration” of
repeat buyers, thereby attracting skills and financial purchasing power, the
province has to find ways to grow in an environmentally friendly way. He
believes that this is a more crucial requirement for the Western Cape than for
the Gauteng region for instance, because it is the perception of a great
lifestyle that is a key skills drawcard for this region, and the green
environment in turn is key to quality of life. Gauteng, on the other hand, has
the advantage of being the continent’s biggest economy, and the services hub
not only for the mineral rich region that surrounds it, but also for Southern
Africa. That is Gauteng’s drawcard for skills.
In addition, he says, land scarcity in the City of Cape Town is more
pronounced than in the likes of land-locked Gauteng, causing property values to
be consistently more expensive. In the 2nd quarter of the average
property price of Western Cape properties transacted and financed by FNB was
R978,945. Despite having higher per capita incomes, the Gauteng price average
was lower at R887,633 due, we believe, to that province being land-locked and
thus not having any physical barriers to development such as mountains and sea.
In the Western Cape, we thus have a greater challenge than the rest of the
provinces in terms of affordability of housing and of property in general. To
keep our province’s economy growing strongly will thus require innovative use
of land.
Queries:
John Loos Clinton
Martle
Household and Property Sector
Economist Property
Leader Strategist
FNB Home Loans FNB
Home Loans
Tel: 011-649 0125 Tel:
021-480 8117
Cell: 083-453 8096 Cell: 082-782 5806
Email: john.loos@fnb.co.za Email:
clintonm@fnb.co.za
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