Garden Route - the future in semi-gration?

The Garden route has long since been one of SA’s quality tourist and holiday destinations. More recently, though, it appears to have become a popular “semi-gration” destination according to an FNB special survey, as quality of life in the larger metros deteriorates. Many of these “semi-grators” commute long distance to the larger cities. However, rapid growth in the economy of this region suggests that an increasing number of skilled people may be attracted to the region by its own economic opportunities. All of this is great for residential property in the area, and we see the Garden Route as one of SA’s top performing property regions in the years to come.

It is old news that the deterioration in quality of life in some of SA’s major metropolitan areas is becoming a key issue. While crime is a major problem for metropolitan suburbanites, especially in Gauteng, the deterioration is probably about more than just crime. SA’s improved economic performance since the early-1990s has driven up the middle class numbers, fuelling higher demand for housing as well as for consumer items such as motor vehicles.

Higher demand for property has fuelled higher property values, which in turn are fuelling densification of living and working patterns, while far more rapid new vehicle sales than a decade ago means that congestion is becoming more problematic at a steady pace.

The cumulative result must be a rise in average human stress levels, and for an increasing number of people the search for a more relaxed lifestyle begins. Many people emigrate, with crime the key driver in many instances, but many prefer the newly-termed “semi-gration” option, which involves moving within the country to escape some of the problems that confront them.

One of the well-trodden semi-gration routes has been from Gauteng in the direction of Cape Town, a city that prides itself in having a great lifestyle. While this assertion still holds merit, Cape Town also finds itself densifying and becoming steadily more congested and polluted, its crime rates are not low, and in years to come we believe that an increasing number of “semi-grators” will take their lifestyle search to far smaller urban areas as a result.

One such area that really stands out as a potential semi-gration destination is the Southern Cape/“Garden Route” region, which includes the major towns of Plettenberg Bay, Knysna, George and Mossel Bay.

The region has an enormous amount going for it due to its natural beauty, along with man-made beauty in terms of some of the country’s top golf resorts, and thus its attractiveness as a tourism region. It is relatively unspoilt, but yet has enough “critical mass” to have good services such as schools, hospitals and retail. George also has an airport to and from which most of the major airlines fly regular flights, providing the services for those individuals needing to commute regularly to and from the major cities.

FNB SURVEY POINTS TO STRONG SEMI-GRATION RATE TO THE GARDEN ROUTE REGION

Not surprisingly, therefore, a special FNB survey of Estate Agents operating on the Garden Route has supported the anecdotal evidence of the increased significance of “semi-gration”. Approximately one in two Estate Agents report that they have noticed an increase in semigration to the Garden Route recently.

The survey was conducted by FNB in addition to its quarterly Residential Property Barometer in the first quarter of 2008. The Estate Agents surveyed were from the larger, well established agencies along the Garden Route.

Crime rates, traffic congestion and the hectic lifestyles experienced in the larger cities are cited as key reasons for this movement. Gautengers are the predominant group semi-grating to the Garden Route, followed by migrants from the Western Cape and the Free State.

An interesting emerging trend is that of the “Commuters”. Estate agents claim that they are also noticing an increase in buyers who have opted to live on the Garden Route, but who commute weekly for businesses purposes to the larger cities. While the Garden route residential property market has not escaped the downturn, and has slowed significantly in recent years, it may have held up slightly better than many other areas in the country. About 72% of Garden Route properties sold for less than their asking price in the first quarter of 2008, whereas this level was 83% nationally. This may be due to the increased popularity of the region, rapid long term economic growth, as well as buyers generally being more affluent and less affected by the current economic conditions that hound the average national buyer.

In the less holiday-driven towns of George, Mossel Bay and Oudtshoorn, average house price inflation still appeared relatively healthy as at the first quarter. The holiday-driven towns of Knysna and Plet fared more poorly, but this should be expected during times of rising interest rates and general property downturns.

SOUTHERN CAPE/GARDEN ROUTE PROPERTY PERFORMANCE SUMMARY - QUARTER 1 2008

Property sellers along the Garden Route are also less likely to emigrate from South Africa. The national average for emigration as a reason for selling property is 12%, compared with 7% for the Garden Route.

Understandably, first time home buyers account for only 5% of property sales along the Garden Route, while this figure was 14% nationally for the first quarter of 2008. The relatively high prices of properties in this area make it difficult for the first time home buyer. Therefore, the FNB survey supports the notion that the traditionally holiday-oriented Garden Route may be becoming sought after as a haven from the stresses of the larger cities, with some even prepared to commute extensively between home and work. This may positively influence property price inflation in this region, as well as help to generate a demand for rental property in the larger cities.

DATA ALSO SUGGEST THAT THE GARDEN ROUTE MAY BE SA’S STRONGEST ECONOMIC GROWTH REGION


Graph data source: Globalinsight

But far from being just a long distance dormitory region for high income services sector employees who are prepared to take on weekly commutes, the Garden Route is rapidly developing an economy of its own, which in time will attract people in larger numbers to increased job and business opportunities locally.

The region may well have become the most rapid economic growth region in South Africa. Whereas the Western Cape and Gauteng provinces have succeeded in growing their real economies in excess of 5% per annum on average over the past 5 years, Globalinsight estimates that the Eden District (including former magisterial districts Heidelberg, Riversdale, Mossel Bay, George, Oudtshoorn, Calitzdorp, Ladismith, Uniondale, and Knysna) grew its real economy at an average of above 9% from 2003 to 2007, far above the national average or any of the provincial averages. The main drivers of growth in this region are believed to be the districts of George/Knysna and Mossel Bay.

CONCLUSION

In a nutshell, therefore, the Garden Route region is arguably one of the most promising residential property regions in South Africa. Not only does its natural beauty lend itself to a thriving holiday and tourism industry, but its accessibility also promotes it as a long distance commuter region for the affluent. In addition, its rapid growth economy should create solid employment and purchasing power growth in the region, driving local primary residential demand. The region’s challenge? Its rapid growth may mean that its economic size doubles in less than a decade. Its authorities need to plan its development well, and to ensure that it develops in a less haphazard way than SA’s major metros, so as to preserve it as the lifestyle attraction that it is.

Article by: John Loos - www.fnb.co.za