South Africa’s residential property market remains resilient

A steady increase in first-time homeowners continues to provide a healthy and fundamental underpinning for South Africa’s residential property market, which remains steadfastly resilient, says Dr Andrew Golding, CE of the Pam Golding Property group, in the latest Pam Golding Residential Property Index.

“Despite an unexpectedly weak start to 2015 for the South African economy – largely due to the impact of nationwide load-shedding - the performance of the local residential property market continues to compare favourably relative to other global markets.
“Furthermore, the loss of momentum in local house price inflation has been limited. Prevailing low interest rates, a modest improvement in household disposable income and a marginal strengthening in the overall economy suggests average house price inflation of high single digits this year. With inflation forecast to average just five percent in 2015, it is anticipated this will allow for a real increase in house prices,” says Dr Golding.
According to the Pam Golding Residential House Price Index national house price inflation peaked at 6.7 percent in the third quarter of 2014 and has since eased to an average of 6.3 percent in the first quarter of 2015.

“The price performance in the lower price band, which has been the strongest performer of late, appears to be losing momentum,” he says. “The pace at which prices are increasing is clearly slowing and it appears that buyers in this price band may be starting to feel the impact of the recent deterioration in economic conditions.

Source: Pam Golding Residential Property Index
“However, it is useful to compare local house price inflation to the price performance in other global property markets as this reveals that South Africa remains one of the better performing housing markets internationally.”
According to the Global Property Guide, South Africa was the 10th top ranking global property market in the final quarter of 2014, with nominal housing inflation of 8.1 percent. However in real terms, South Africa is only 22nd with a real (inflation-adjusted) increase in prices of 2.6 percent during this period. Although relatively low when compared to other global markets, which reflects South Africa’s relatively high inflation rate, it is a marked improvement on the final quarter of 2013 when local real house prices fell by 1.3 percent.
There is a growing divergence in performance between the various global property markets, with about half these housing markets recording stronger upward momentum in prices, while the balance showed weaker momentum or in some cases, outright decline last year (2014).
The PGP Index reveals that the underlying trends previously identified within the various price bands remain largely unchanged, with the lower price band under R1 million recording the strongest growth at 9.1 percent in March 2015 from earlier levels, while the upper price band over R3 million continues to lag, with an increase of 2.3 percent in March.
Says Dr Golding: “However, these trends are losing momentum which suggests they may be approaching a turning point. This includes factors which point to a potential recovery in the performance of the upper price band, with PGP’s Gauteng region reporting increased activity in the upper price band in recent months. In the Western Cape, PGP notes a growing trend towards ‘upscale downsizing’ with home owners increasingly favouring smaller homes in a similar or higher price band, with lower overheads and improved security. This is coupled with renewed interest among ultra-high net worth individuals (UHNWI’s) in tangible assets - such as property, with the recent Wealth Report highlighting Cape Town and Johannesburg as being among the best-performing global housing markets in 2014.”
He says in the lower price band, it appears that buyers may be starting to feel the impact of the recent deterioration in the economy. With less financial wiggle room than higher income brackets these households are typically more sensitive to changes in the economic environment, which may also mean that this segment is often quick to recover when economic conditions improve.
Looking at the three major regions, Gauteng, Western Cape and KwaZulu-Natal, house prices in KZN have outperformed in recent months, attributable to factors including the lifestyle offering and value proposition, the spatial distribution of economic nodes which serves to lessen congestion and the severe stock shortage experienced.
In Gauteng, property developers have returned after a long absence in the wake of the 2007 global financial crisis, resulting in a healthy recovery in the number of new units being sold in this province during 2012 and 2013. This was accompanied by a loss of momentum in price increases, partially attributable to the easing in stock shortage.
Confirming the national trend towards downsizing to more manageable homes, the number of flats and townhouses built jumped by just over 30 percent from a year ago.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 16 Feb 2018
      Whether you own a property in a sectional title complex or are looking to invest in one, the financial standing of the body corporate is the single most important thing that can affect your investment or your buying decision.
    • 15 Feb 2018
      One positive consequence of the financial crash in 2008 was the rise in consumerism, especially in the property market, where buyers have steadily become more knowledgeable and more value conscious.
    • 15 Feb 2018
      While most homeowners will take the agent’s commission into consideration when they are trying to determine what the will get out from the sale of their property, many often forget to factor in the other costs involved in a home sale, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 14 Feb 2018
      The forecast for the national rental market in 2018 remains a mixed bag of good news and bad news. Although rentals are expected to rise slowly as the challenges of home affordability and tighter lending criteria tighten their grip, it’s a double-edged sword as the market also will come under increasing pressure from factors like declining disposable income levels.
    • 14 Feb 2018
      While you may not have intended to place your home on the market, what do you do if you receive an unexpected offer on your home? In areas where demand outweighs the current supply of homes available to buyers, it is not unheard of to have buyers make offers on homes that aren’t on the market, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 14 Feb 2018
      If you are looking to sell your home this year, Debbie Justus-Ferns, divisional manager of Renprop Residential Sales, says that there are five crucial things to do before the ‘for sale’ sign goes up.
    • 01 Feb 2018
      February is the month of love and to celebrate we will be posting about all the things we love this month. Follow the #MyPropertyLoves hashtag to keep up with our favourite things.
    • 01 Feb 2018
      After saving up and months of searching for the right home, applying for a bond and patiently waiting for the keys to the front door, it is finally time to cross the threshold and move into your new home. Now what?
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us