South Africa

Why Capetonians feel the strain of rising semigration

Why Capetonians feel the strain of rising semigration

Ask any Capetonian if they’re feeling the impact of increased semigration to the Western Cape and they’ll answer with a resounding ‘yes’.

They may say it’s evident in the increased price of properties or the longer queues at popular coffee shops – common trends that were once limited to the holiday seasons.

However, while much anecdotal evidence has been shared about the impact of the rise of semigration in the Western Cape, analysing property data over the past five years illustrates the full extent of this ongoing phenomenon.

Pre-2020, the majority of semigration in South Africa was the result of workers flocking to Gauteng in search of employment opportunities in the City of Gold.

In the five years since, ooba Home Loans data shows a shift to the Western Cape, with inbound semigration (moving to the province) having more than doubled over this period.

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The Western Cape accounted for 29% of our semigration home loan applications in Q1 2024 – up from 14% at the start of 2020. In contrast, our statistics show that semigration to Gauteng has declined from a high of 34% in 2019 to 25% in Q1 2024.

Savvy investors are capitalising on the huge demand for rentals in the Western Cape by purchasing investment properties at the highest rate seen in the past five years, according to ooba Home Loans data.

While the majority (66%) of semigration property purchases in the Western Cape are for the purposes of using the property as a main residence, the percentage of investment/rental purchases have been steadily increasing, comprising 30% of Western Cape semigration applications processed in 2023.

Conversely, the percentage of semigration holiday home purchases in the province has declined from the peak of 7% in 2020, to 4% at the end of 2023. In the current high interest rate environment, holiday homes are seen as an expensive luxury.

There has also been an increase in foreign buyers snapping up properties in the province’s tourist hotspots, outpricing locals with their stronger purchasing power.

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Prospective rental investment returns and longer-term capital growth potential in the Western Cape are attracting a large number of investment buyers from other provinces.

With the pandemic now subsided and tourism booming again in the Western Cape, property investors are making the savvy decision to purchase investment properties that can easily be rented out under both short- and long-term leases.

Why the Western Cape?

Semigration first became a prominent buzzword in 2016 and then featured more prominently in 2020, with the onset of the Covid pandemic.

With work-from-home policies enforced across the country, homeowners began to prioritise lifestyle considerations over proximity to urban hubs, as had previously been the case.

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While the lifestyle benefits and urban conveniences have played a large role in driving demand, the main motivator for many semigrants is their quest for better governance and property returns.

The Western Cape has a track record for well-managed municipalities and higher levels of service delivery than most other provinces.

Homebuyers, fed up with issues like water outages and no refuse removal, have recognised this and are voting with their feet by making the move.

While the province is not immune to the major issues facing the country, such as high crime levels and load shedding, residents do have a higher probability of getting the basic services they pay for.

  • Lomberg is CEO of ooba Home Loans