08 June 2023 | Advice, Buyers, Invest, Sellers, Tenants
Thinking Of Semigrating?
First, investigate the municipality you're considering moving to, says Paul Stevens, CEO of Just Property
Have you decided to head for greener pastures, a quieter life, a change of scenery, or better opportunities? You’ve probably got your eye on a particular province and a specific city, town, or village – maybe you’ve even got as far as narrowing it down to your ideal suburb.
No doubt you’ve investigated things like job options, schooling, and transport, but if you’re going to be investing in a new home, you should also be looking at how well your property will hold its value and the provision of basic services and infrastructure maintenance in your new hometown.
Paul Stevens, CEO of Just Property, maintains that one should be guided by how provinces and municipalities perform before deciding where to move. “South African municipalities each have their own unique strengths and weaknesses. If you're considering moving, it's important to research carefully and choose a municipality that's right for you.”
At the top of Stevens’s criteria are:
Financial performance: “Some municipalities are better managed than others. Look for a municipality with a strong financial track record and a good audit rating.”
Service delivery: “Make sure the municipality you're considering moving to is responsive and provides good quality services, such as water, electricity, sanitation, and road maintenance.”
“Of course,” he adds, “as the Auditor General points out in the latest Consolidated General Report on Local Government Audit Outcomes, ‘A clean audit is not always an indicator of good service delivery and does not always correlate directly to the lived experience of all communities in a municipal area’. But it’s a very good place to start when evaluating where to move to.”
These municipalities have sustained clean audit status for a number of years:
According to the AG’s Report: “Municipalities with clean audits are characterised by sound financial and performance management disciplines and perform their functions in accordance with applicable legislation. They plan adequately, implement effectively and report on performance in a credible manner. They further manage projects effectively so deficiencies are identified and rectified promptly and that timelines, budgets, and quality standards are adhered to… municipalities with clean audits demonstrated sound project management disciplines through the effective use of grant funding and spent most of their infrastructure grants…
“We have further seen that municipalities with institutionalised controls and systems to plan, measure, monitor and account for their finances and performance, and to stay within the rules, often also have a solid foundation for service delivery. These municipalities further demonstrate sound project management disciplines and effectively use infrastructure grant funding.”
Food for thought.
Narrowing the focus exclusively to financial management, Ratings Afrika scores 104 local municipalities and the eight metros according to a financial sustainability index which rates their operating performance, liquidity management, debt governance, budget practices, affordability, and infrastructure development. The top-scoring municipalities in this analysis were:
Saldanha Bay 72%
Mossel Bay 70%
The top metro was Cape Town, with 68%, and the top-scoring province was the Western Cape, with an average score of 52%.
Stevens also recommends keeping an eye out for Lightstone’s next Residential Property Index to see where in South Africa property is holding or improving in value. According to the most recent edition, “Annual property inflation remained steady in KwaZulu-Natal and the Western Cape, increased in Limpopo and Mpumalanga, and decreased in the Eastern Cape, Free State, Gauteng, North West and the Northern Cape.”
On average, coastal properties were outperforming non-coast properties, with 7% vs 3% annual property inflation. And freehold property showed a slight edge over sectional title properties.
In Q1 2023, property inflation in the major metros was:
• City of Cape Town 3.4% • City of Johannesburg -0.1% • City of Tshwane 2.9% • Ekurhuleni 2.2% • Ethekwini 3.6% • Nelson Mandela Bay 5.1%
“Our Just Property agents are well-geared to present prospective sellers and buyers with a cost- and obligation-free comparative market analysis. It presents data-driven insights sourced from a range of best-in-class third parties. Then, multiple factors that influence price are addressed”, says Stevens.
There must be something in the water…
Many South Africans, weary of load-shedding, have gone ahead and made their own contingency plans, but Stevens recommends finding out about the power situation from people living in the area you plan to move to.
Believe it or not, some municipalities switch the water off when the lights go out at night… you’d want to know that in advance, wouldn’t you? How quickly are problems dealt with? If there’s a history of day-long outages, can you live with that?
And speaking of water, the cholera outbreak in Hammanskraal should be a warning to all, he says. The Blue Drop Report ranks South African water system authorities, municipalities, and provinces on water quality. The Blue Drop Risk Rating (BDRR) reflects the total risk of each supply system and should also be added to prospective semigrants’ list of considerations.
While 48% of supply systems were in the low category in last year’s Blue Drop Report, 34% fell into the high and critical risk categories. The next report is due in July 2023.
Stevens adds that once you’ve considered how your municipality and province perform in terms of service delivery, continue digging to establish more that you wouldn’t be aware of as an out-of-towner, “for instance, whether the suburb you’re considering is earmarked for higher density development.”
“This is a lot of work and research for the average home buyer,” Stevens concedes, “but it’s very important to know exactly what you’re getting into in a country like ours. We’re hardly aware of all the local knowledge we pick up when we’ve lived in the same area for years and years. It’s significant.
“There are still great opportunities in the South African property market. Start by finding the municipalities that operate well and invest in infrastructure; seek out those that are happy to collaborate with local businesses and communities – these are the places to invest in. And then, find a resident agent with excellent local knowledge who can provide you with all the data and advice you need.”