select
|

Smaller is better, but even the smaller home market shows signs of slowing

(Article by John Loos - household and property sector strategist at FNB Home Loans)

We have for some time been saying that smaller is better when it comes to home buying, but that doesn’t mean the smaller home market isn’t slowing down.

All of the factors we have periodically claimed are more in favour of small home buying remain relevant: the economic environment remains weak, causing weak household income growth, and interest rates have risen mildly in recent years.

Effective personal tax rates continue to rise, and municipal rates and tariff increases outpace general inflation. And, of course, there is the sliding scale for transfer duties, putting more expensing homes, which are on average larger, into higher transfer duty brackets. So, not surprisingly, the smaller home market continued to outperform the medium and large-sized segments in the third quarter.

However, all of this does not prevent the smaller-sized market from going into a slowdown too, and indeed, while it remains the relative best performer of the three size segments, it has shown signs of slowing of late.

In our FNB House Price Indices, the three size categories are the small homes of 20 to 80m2, medium homes of 80 to 230m2, and the large homes of 230 to 800m2.

The house price inflation rates for the three categories continue to differ noticeably. The small home category’s average price is R616 180 and price inflation was the highest of the three segments, at 8.1 percent  year-on-year in the third quarter. However, this represents a slowing in growth from the previous quarter’s revised rate of 11.7 percent and the first quarter’s high of 11.9 percent.

Next was the medium home category with an average price of R1.111m and 5.8 percent year-on-year price inflation, which reflects a slight de-celeration from 6.6 percent in the second quarter and 7.5 percent in the first quarter.

The large home category with an average price of R1.958m may be stabilising a bit at very weak levels, having seen its inflation rate accelerate mildly from 1 percent year-on-year in the first quarter to 3 percent by the third quarter. At such a low price inflation rate, however, we cannot yet call this a strengthening, as the 3 percent rate remains significantly negative in real terms, when adjusting for general inflation, as measured by the CPI (Consumer Price Index), of nearer to 6 percent.

The small home category has “out-inflated” the other two categories for most of the time from 2010. And if one evaluates the performance of the three size categories’ price indices since even further back from the first quarter of 2001, a more than 15 year period, we see that the small segment has outperformed the other two on a cumulative inflation basis.

The smaller house price index has inflated by 372.9 percent since the first quarter of 2001. The medium house index is not too far behind with 351.9 percent cumulative inflation over the same period. But the large home segment has underperformed by a significant margin, especially since around 2011, cumulatively inflating by a significantly lesser 285.3 percent since early-2001.



  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 21 Feb 2018
      Given the hand they were dealt, government has performed a delicate balancing act which it is hoped will serve to reignite confidence in investment in South Africa, regain our global credibility and satisfy the credit ratings agencies, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
    • 21 Feb 2018
      The real estate mantra, ‘location, location, location’ remains a strong market influence regardless of the prevailing economy, with suburbs like Rondebosch enjoying the buffering benefit of being ideally situated.
    • 21 Feb 2018
      These days most buyers are using online property portals like Private Property when house hunting due to the convenience, up to date information and variety on offer. “The property portals have revolutionised the way buyers shop, but they do need to be cautious – viewing photos online is no replacement for viewing the property in person,” says Bruce Swain, CEO of Leapfrog Property Group.
    • 20 Feb 2018
      Owning a home is a milestone that most South Africans aspire to. Becoming a homeowner is a step towards growing personal wealth and owning an asset that appreciates in value over time, provided of course that the correct principles are applied during the buying stage of the process, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Feb 2018
      The suburb of Greenstone in Johannesburg east came to be over the last two decades. “In the beginning, it was literally just a hill with not so much as a shopping centre,” says Michael Levy, Property Consultant at Jawitz Properties Bedfordview. Today it has plenty shopping facilities and is fully built, boasting high-density, upmarket housing and residential estates, though still has a few pockets poised for commercial development.
    • 20 Feb 2018
      A major shift in the ageing paradigm has precipitated an equally dramatic transformation in the retirement sector, with modern accommodation options worlds away from the conventional model.
    • 19 Feb 2018
      Possibly one of the biggest sources of contention between landlords and tenants surrounds the rental deposit. “Most tenants rely on getting their rental deposits back when moving, so that they can use it to pay a deposit on their new home. Having it withheld or even having large amounts deducted can lead to a lot of distress,” explains Bruce Swain, CEO of Leapfrog Property Group.
    • 19 Feb 2018
      Situated approximately halfway between Johannesburg and Pretoria, Midrand was established in 1981 and forms part of the City of Johannesburg Metropolitan Municipality. It has become one of the major business hubs in the country with major pharmaceutical, textile, telecommunication and motoring giants situated within its boundaries.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK