Outlook for South Africa’s residential property market improving

Despite the deterioration in South Africa’s economic growth prospects, the outlook for the country’s residential market may actually be gradually improving, says Dr Andrew Golding, CE of the Pam Golding Property group in the latest (October 2014) Pam Golding Residential Property Index.

Instead of focusing purely on average price indices as is commonly the case in the industry, The Index is based on the globally respected ‘repeat sales’ methodology incorporating residential property transactions registered at the Deeds Office as well as other data sources across the country’s residential property market, including Lightstone and PGP’s own extensive sales data. It therefore presents an accurate, holistic snapshot of property pricing trends in the South African residential real estate market by comparing the same properties over the years in which they have been sold more than once.

Comments Dr Golding: “After a turbulent year, characterised by labour unrest and political uncertainty and further impacted by ongoing power shortages, there are tentative signs that economic activity is finally rebounding in the last few months of the year, which should gather momentum as we move into the New Year. With expectations of a modest strengthening in economic growth, coupled with an easing in the inflation rate and a very gradual series of interest rate hikes, and further fuelled by ongoing positive sentiment, the outlook for South Africa’s residential property market is positive.

“The year 2014 has been the year when house price growth has finally begun to move into above-inflation, positive territory for the first time since the 2008 recession ended. As The Index reflects, the national trend line of property value growth shows no sign of faltering through October  and in fact has strengthened since the previous month as it powers its way towards the 8% nominal house price benchmark and indicating further progress ahead.”

The Index reveals that while the burgeoning KwaZulu-Natal index is moving in unison with the national index, Gauteng appears to be levelling off while the Western Cape is taking a breather, with both these regions suffering from a serious shortage of homes for sale. However, stock shortages are common in all price bands and in all regions.

Analysis of these three provinces in terms of house price bands illustrates as one would expect in terms of income levels, how lower-priced homes are leading the field – particularly in KZN and the Western Cape. Price growth in homes valued at less than R1 million continues to accelerate dramatically, with KZN climbing almost vertically to 16.81% in October, closely followed by the Western Cape at 15.32%. Gauteng is also improving, albeit at a slower pace, reaching house price growth for October of 9.62%, just below the national index of 10.63% for this price segment.

Surprisingly, price growth in the price band from R1 million to R2 million is far more modest, with all three provinces indicating a slowdown, with Gauteng having the lowest growth.  Bearing in mind that The Index does not specifically cover  luxury market sales due to insufficient volume data, the higher price bracket, ie homes from R2 million and above, is erratic, with both KZN and the Western Cape showing wildly swinging results for October. In this sector KZN, powered by a resurgence in holiday and investor buying, has topped 14.5% growth, Gauteng recorded 7.48%, while the Western Cape dropped to below 5% from a high earlier in the year of 13%.

The Index also bears testament to a national trend towards smaller homes, such as two and three bedroom freehold and sectional title property, as well as increased demand for residential developments in key hubs and popular nodes - including the demand for a convenient lifestyle and student accommodation. Investors and developers have returned to the market, resulting in a flurry of new build development projects, particularly in major centres such as Gauteng and the Western Cape. Over and above the increased demand for apartments in new developments is an emphasis placed on secure estate living, giving impetus to lifestyle estate developments.

PGP National Index - October 2014

Provinces - October 2014

Provinces < R1m - October 2014

Provinces > R2m - October 2014

2 Bedrooms - October 2014

3 Bedrooms - October 2014

Read the Pam Golding Residential Property Index

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