Property Barometer - Area Value Bands

The latest FNB Property Barometer shows that in the 6 major metro regions, the upper income areas continued to show the most noticeable slowing in house price growth, admittedly off the highest base.

The September FNB National House Price Index showed some renewed year-on-year growth acceleration, following a prior slowing trend, suggesting that the days of a well-balanced residential market are not quite over yet.

The Area Value Band Indices are insightful in providing an idea of the relative performances across areas grouped by the average price levels of areas in the 6 major metros of South Africa (Tshwane, Johannesburg, Ekurhuleni, Ethekwini, Nelson Mandela Bay and Cape Town)

And the relative performances seem to point to the high end of the market slowing the most noticeably, which in turn seems to be broadly in line with what the survey respondents in the FNB Estate Agent Survey have been telling us too. 

Using Deeds data transactions by individuals, they compile the 4 FNB House Price Indices by Major Metro Area Value Band, namely Upper Income Areas (Average house price = R2.67m), Middle Income Areas (Average Price=R1.46m), Lower Middle Income Areas (Average Price = R879,469) and Low Income Areas (Average Price = R461,072).

On a year-on-year basis, we see that the Upper Income Area Segment’s average house price growth has slowed from 10.2% back in the 3rd quarter of 2014 to 5.3% by the 3rd quarter of 2015. Through 2013 to early-2015, this segment had the highest price growth of all 4 segments, as the high end played “catch up” to the lower priced segments. But from the highest base, this segment has showed the most noticeable slowing in growth through 2015 to date, although still experiencing mildly stronger year-on-year price inflation than the Lower Middle Income and Low Income Areas Value Bands.

By comparison, the Lower Middle Income Area Segment inflated by 4.4% year-on-year, and the Low Income Area Segment by 3.5%, while the Middle Income Area Index showed the strongest average price growth of 7.3%. All 4 segments were showing slowing year-on-year price growth rates as at the 3rd quarter though.

This information lead us to believe that the slight recovery in the FNB National House Price Index may be driven by the Lower Middle Income Area segment, and that we may see this segment’s Price Index holding up a little better in the near term.

With regard to the Upper Income Area Value Band, however, we remain of the belief that it will begin to “underperform” the other 3 segments in the near term. This is because of our view that economic growth will continue on its broad multi-year slowing, and that this will shift a portion of residential demand down towards the Middle and Lower Middle Income Areas.

FNB concludes that however, the experience of the 2008/9 recession suggests that, while the Lower Middle Income Areas may begin to perform relatively better in the very near term, ultimately, should the economy proceed into recession, the financial pressure will become greater on low income households. The average house price deflation was thus most significant in the Low Income Area Value Band back in 2008/9 according to our price measures.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 20 Nov 2017
      Since 2012, sectional title complexes have been leading the South African property market, not only in terms of price growth, but sales volumes as well. Remaining relatively strong, even in the face of 2017’s political and economic turmoil, experts say this market segment could offer valuable insight into South Africans’ property purchase priorities.
    • 20 Nov 2017
      Regardless of whether you are purchasing your first start-up home, downsizing or moving in with roommates, finding ways to maximise small spaces can be a big advantage, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Nov 2017
      Property valued at approximately R1 billion is on High Street Auctions’ sales floor during the month of November, including the much-anticipated sale of the Tshwane Mayoral Residence and the land occupied by one of South Africa’s oldest operating gold mines.
    • 17 Nov 2017
      FWJK has announced the launch of its latest residential brand, the Lil’ Apple, which will be launched simultaneously in two developments in Cape Town and Umhlanga totaling 600 apartments. The Lil’ Apple is set to be a brand of FWJK’s New York style apartments which will be rolled out nationally.
    • 17 Nov 2017
      It’s been a tumultuous year on many fronts, with socio-political uncertainty setting the tone for much of South Africa’s economic activity yet despite this and seemingly counter-intuitively, the residential property market has held up well.
    • 17 Nov 2017
      The EAAB (the Estate Agency Affairs Board) recently claimed that around 50,000 illegal estate agents could currently be operating illegally.
    • 16 Nov 2017
      Penthouses are synonymous with New York – characterised by high-rise living that is decidedly luxurious and spacious. While exclusivity comes at a price, you can still create a “penthouse” look and feel in your existing apartment or even the upstairs bedroom of a double storey house with some clever design changes and styling touches.
    • 16 Nov 2017
      The area has long been popular with kite surfers and, with escalating property prices in Cape Town itself, is increasingly in demand with home owners who work in town, but are looking to invest in more affordable properties.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us