How To Successfully Semigrate
Making the move to the coast? Here’s how to lose less in an expensive transition.
Many Gautengers dream of leaving their busy life in the big smoke and setting up a new slower life in beautiful Cape Town. Unfortunately a lot of these dreams never come true because there is a common belief that the drop in income and property size will be too big. They see themselves moving from a four-bed home with a pool to a two-bed flat with a fan. But the truth is that if they plan well and do their research right, a shift to the coast can become a reality.
This is according to PropertyFox’s David Gibbons who recently ‘semigrated’ from Jo’burg to Cape Town in search of a slower, more outdoorsy lifestyle.
The move was challenging; there were sacrifices involved, but if you go in with your eyes wide open you can keep costs low and maximise returns
“I sold-up, quit my corporate job and relocated to Cape Town. The move was challenging; there were sacrifices involved, but if you go in with your eyes wide open you can keep costs low and maximise returns.”
The trend towards semigration is not new but shows no sign of slowing down. In 2016, Cape Talk reported that 20-30% of all buyer enquiries in the Western Cape stem from Pretoria and Johannesburg residents looking to move. Additionally, Business Tech quoted a 2017 FNB Repeat Home Buyer Study that found the Western Cape’s repeat buyer net inflow makes up a whopping 17.4% of the province’s total repeat buys. The same study reported that 56.2% of Gauteng’s ‘semigrants’ opt to relocate to the Mother City. The question of why has been answered extensively – it’s mostly linked to a long-term investment in lifestyle.
Gibbons said PropertyFox – South Africa’s consumer-focused smart online house seller – often hears from people who are in their forties or fifties and wanting to sell up their first or second homes in Gauteng and make the move to the coast. “We feel strongly that they can make their dream work for them. The key lies in limiting their loss in the transaction process. By shopping around for a low-commission-based estate agency to sell their Jo’burg property, they can keep their fees down, and potentially save a significant sum to contribute to the expenses of the move, and possibly some of the down payment on a new Cape Town home.”
Gibbons learned a few things in his successful semigration. Here are his top tips.
- Identify the phase of life you’re in and whether semigration makes sense
Initially semigration was very much comprised of mid- to high-income established career people opting to purchase property in Cape Town as a retirement investment – either to rent out or to live in. However, Moneyweb notes that the trend has spread to young families, who are primarily driven by the wealth of school prospects in the Cape. In the opposite direction, many young people are opting to relocate to Gauteng in search of employment opportunities. A 2016 study by Adzuna shows that Johannesburg salaries (average annual salary: R427, 892) are a staggering 18% higher than Cape Town salaries (average annual salary: R352, 089), with far more jobs advertised at the time the research was conducted. This makes salary an important consideration for semigration seekers.
- Understand the link between high demand and property prices
It’s a common myth that a substantial sum of money will buy you a mansion in Jo’burg and a broom closet in the Mother City – as with most real estate factors, it depends where in Joburg and where in Cape Town. Location, as per usual, is everything. You could find a relatively big house in Fish Hoek or Melkbosstrand in Cape Town, but a smaller home for the same price in Jo’burg’s Illovo or Sandhurst suburbs. However, it’s an indisputable fact that the Western Cape’s unrelenting popularity is driving up property prices. With 56% of the bonds that Gauteng residents registered last year being for properties in the Western Cape, prices are being pushed up far beyond inflation, as shown by the PGP Index cited by the Times, which reported an 11.55% house price inflation for the Cape from January to October 2016, compared to a 4.9% national average.
- Realise that some aspects of the myth may be true
Although location does play a big part, as a general rule, you’ll get more erf for your buck in Joburg. Gibbons believes, “Cape Town property is valuable, well located and small; Joburg property is valuable, well located and big. For the same sum, you could probably get an 850m2 estate in the Cape versus a 2 acre (8093.71 m2) property in Gauteng.”
- Appreciate the difference between buying and renting
While Cape Town has high property prices, it has a significant number of low-end rentals. In contrast, Johannesburg property prices are lower, but there’s demand for high-end rentals. According to Gibbons, “A family home in Sandton will cost you R70k to R80k to rent, while its Sea Point equivalent will be R40k. However, to buy that Sea Point home would be vastly more expensive than to purchase its Joburg equal. Despite this, I still recommend buying in Cape Town rather than renting. This is a market where your investment is likely to pay off due to inflation and demand driving quick appreciation.”
- Don’t buy in Cape Town before you’ve sold in Joburg (and vice versa)
Gibbon’s advice is to sell before you buy: “It’s important to understand that the Cape Town market is hot: houses sell quickly, often with a turnaround time of two weeks. In Joburg, the turnaround time generally exceeds 90 days, according to various real estate agents and my own experience. With this in mind, it’s wise to wait until you’ve sold your Gauteng property before purchasing a new CT home. However, your house should be a castle not a prison: you don’t want your move to be stalled by a slow sale. PropertyFox reduces the expense of selling, meaning that you don’t have to wait as long for your house to appreciate before putting it on the market.”
- Try before you buy
An excellent tip is to utilise Airbnb to live in a neighbourhood and fully experience it before making the decision to purchase property there. If you can, spend a few weeks living in various spots before you commit to your future ‘hood’.
- Choose a low-commission agency to save money for the move
PropertyFox takes only 1.5% commission on transfer, which can save sellers anything up to and exceeding R100 000. With massive transaction costs, transfer fees, and other expenditures involved, selling in Joburg and buying in Cape Town incurs maximum expense, which means you need to actively conserve capital in the transaction process. Use your savings from PropertyFox to cover the move expenses and assist with purchasing your new property in Cape Town.