Areas of vibrant growth in South Africa’s residential property market

Ongoing trends of urbanisation, migration between provinces and the growing appeal of smaller, more centrally-located homes indicate that pockets of strength which are achieving vibrant growth will remain in certain sectors of the country’s residential property market, says Dr Andrew Golding, chief executive of the Pam Golding Property group, commenting in the latest Pam Golding Residential Property Index.

“Even as regional house price growth appears to be slowing off the back of continued weak economic data, growth in house prices in many of the major metro regions continues to increase at a brisk pace.

Pam Golding Properties national index

“Given that these metro areas are the drivers of growth in provincial economies, a steady influx of people seeking economic opportunities means there is a steady demand for housing. Added to this, a lack of land within metro areas along with growing congestion which makes long daily commutes from far-flung suburbs difficult is resulting in South African metro areas becoming more concentrated.”

A recent research report by Lightstone notes that Midrand in Gauteng best illustrates this trend. With a doubling in the number of properties and a 550 percent increase in the total number of sectional title properties since 2000, Midrand is on track to be the country’s most densely populated area. With densification in metro areas likely to continue, the report suggests that inner-city regeneration and improved building and transport technology will enable South Africa to drastically change the shape of its cities the future.

The potential role that improved public transport could play in triggering the next property boom has been highlighted by Associate Professor at UCT, Francois Viruly, who says each local property boom during the past 20 years has typically been associated with a unique social catalyst, such as industrialisation or an increase in the number of cars, which led to the rise of suburban living. With the latest property cycle having come full circle, he believes the next boom could begin as soon as 2018 and will likely be driven by improved public transport and the desire of households to live in smaller residential units that offer easy access to work, leisure activities and educational facilities.

Housing heat map – house price inflation for first half of 2015

Says Dr Golding: “The increasing popularity of smaller more conveniently located property could explain the growth in sectional title prices which since late-2011, has accelerated slightly more rapidly when compared to freehold properties.  Following a slowdown in freehold house price inflation in late-2014, sectional title property prices began to outperform freehold in April this year – for the first time since the 2008 recession. Although house price inflation in both categories is now moderating, healthy demand for sectional title properties means that prices for this category look set to remain somewhat more resilient.

“While national house price inflation continues to slow, easing to an annual growth rate of 5.3 percent in June (2015), the levelling off is quite gradual, with June’s growth rate just 1.25 percent below the recent peak of 6.5 percent recorded in the third quarter of 2014. This modest easing is not surprising, given various factors such as rising price pressures, lack of consumer confidence and the prospect - and subsequent announcement - of higher interest rates.”

The Pam Golding Residential Property Index says interesting trends are revealed within the various regions and price bands, with KwaZulu-Natal achieving impressive growth in both the lower and upper price bands, and with the lower price band nationally reflecting the strongest house price inflation – increasing by 8.5 percent in June and averaging 8.2 percent during the first half of the year.

Housing affordability and first-time buyers (% total)

While house price inflation in Gauteng continues to track the national average, both KZN and the Western Cape registered house price inflation of 7.3 percent in June, with house prices in the Cape levelling off at a faster rate than in KZN.

Says Dr Golding: “A factor which may be fuelling the marked growth in the top end of KZN’s housing market is the increase in the number of resident millionaires. According to the latest SA Wealth Report by New World Wealth, although most of South Africa’s dollar millionaires live in Johannesburg, Durban is producing these at a faster rate than the rest of the country overall. While the total number of millionaires in South Africa increased by 135 percent since 2000, in Durban the number of wealthy individuals increased by 200 percent to 2 700.”

Housing affordability – global comparison.

Although no longer the top performing region overall, in the lower price band KZN is clearly leading the way with an annual growth rate of 17.2 percent in June. This is significantly higher than house price inflation of 11.9 percent in the lower price band in the Western Cape and 5.2 percent in Gauteng.

But, points out Dr Golding, it is important to recognise that even though house prices are rising in relation to household disposable income, housing remains relatively affordable in South Africa, both historically and by international standards. “This is particularly true when compared to housing affordability in countries like Australia and Britain where soaring house prices have made home ownership unattainable for millions of households.”

Absa luxury house price inflation

In the upper price band, the PGP Index reports that house prices in the upper price band above R3 million continue to trail behind the national average. In June house prices in this category declined by 2.7 percent from year earlier levels following a 0.4 percent decline in May. This is the first time since the 2008/9 recession that house price inflation in this band has slipped into negative territory.

House price inflation – freehold vs sectional scheme

“However,” says Dr Golding, “it must be kept in mind that this is a national average and that this price category continues to show healthy annual increases in certain regions and in certain major metros.”

Read the full report

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 19 Jan 2018
      Extending from Randfontein in the west to Roodepoort in the east and including the towns of Krugersdorp and Magaliesburg, the West Rand has a plethora of property available to residents who choose to make this unique area their home.
    • 19 Jan 2018
      When it comes to financial planning, doing the work to ensure you’re prepared for unexpected emergencies is just as important as ticking off your other goals and New Year’s resolutions. The beginning of the year is also the perfect time to review your various insurance policies.
    • 19 Jan 2018
      No surprises at the first Monetary Policy Committee of 2018, as Reserve Bank Governor, Lesetja Kganyago, announced that the interest rates would stay at their current levels.
    • 18 Jan 2018
      The Southern Suburbs make up some of the most popular residential areas in Cape Town, comprising charming groups of suburbs which lie to the south-east of the slopes of Table Mountain. It is seen as the city's most expensive residential neighbourhoods with a choice of various private schools, upmarket eateries, wine estates, beautiful homes and trendy apartments.
    • 18 Jan 2018
      New year, new goals! If you’ve resolved to purchase your first property in 2018, then this 6-step guide from the Rawson Property Group is a must-read. It will help you navigate and simplify what is often be seen as a confusing process of buying your first home – right from the house-hunt to the house-warming.
    • 17 Jan 2018
      While the current property market may still favour buyers, it doesn’t mean that they shouldn’t be well prepared before putting in an offer to purchase.
    • 17 Jan 2018
      Lightstone lists Blair Atholl as the most expensive suburb with an average house price of R11.2 million, followed by Westcliff (R10.5 million), Dunkeld (R9.3 million), Sandhurst (R9.1 million) and Inanda (R7.2 million).
    • 17 Jan 2018
      As it currently stands, there are four main ways in which a home can be bought in South Africa, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who adds that deciding in which legal entity to purchase the property is not a decision that should be entered into lightly, as each has its pros and cons.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us