Gauteng Property market gains traction

The long period of low interest rates, and a recession fading in the memories of many, appears to be gradually putting Gauteng’s property market on a better footing.

The FNB Gauteng House Price Index showed a further slight acceleration in the 1st quarter of 2012. From the 1st quarter a year ago, the average house price has risen 6.8% to the 1st quarter of 2012. This is now very near to the national average price growth rate of 7.1% for the 1st quarter of 2012, and is the 3rd successive quarter of strengthening price growth in the province. This is also the highest price growth rate in the Gauteng House Price Index since the 2nd quarter of 2008.

Gauteng, being a very diversified services-driven economy, and with its property market being overwhelmingly primary residential demand-driven, is typically less volatile than many of the country’s smaller property regions. Therefore, it appeared to experience less price decline in 2009 than did the country as a whole, while also showing significantly less price increase during the “mini-recovery” of 2010 after the big fall in interest rates in 2009.

But now, about two-and-a-half years after the major interest rate cuts of 2009, finally the province’s market appears to be gaining more “traction”.

In real terms, too, with consumer price inflation at just above 6%, it would appear that the province’s house price growth rate has moved into slightly positive terrain.

The average property transaction price for Gauteng was R866,806 in the 1st quarter of 2012, according to FNB’s data.  While now improving, the recovery has been tough going, and this price level is only 9.3% higher than the level reached in the 2nd quarter of 2008, which was just before price deflation set in in the province’s market.

Breaking it down by major regions in Gauteng, it would appear that the province’s major metro , namely City of Joburg, has recently shown the most strength in its property market of the 3 major metros, the other 2 being Ekurhuleni and Tshwane.

This emerges in both the average price growth rates as well as in FNB Valuers’ Average Market Strength ratings by metro.

Note: When an FNB valuer values a property, he/she is required to provide a rating of demand as well as supply for property in the specific area. The demand and supply rating categories are a simple “good (100)”, “average (50)”, and “weak (0)”.  From all of these ratings we compile an aggregate demand and an aggregate supply rating, which are expressed on a scale of 0 to 100. After aggregating the individual demand and supply ratings, we subtract the aggregate supply rating from the demand rating, add 100 to the difference, and divide by 2, so that the FNB Valuers’ Residential Market Strength Index is also depicted on a scale of 0 to 100 with 50 being the point where supply and demand are equal.

In the 1st quarter of 2012, the FNB Market Strength Indices per Gauteng Metro pointed to the City of Joburg having the best balance between supply and demand, at a level of 49.4, just shy of the crucial level of 50 at which the demand rating would match the supply rating.

By comparison, the Tshwane (45.48) and Ekurhuleni (45.65) markets appear a little bit less “balanced”

These differences in the perceived balances between supply and demand appear to manifest themselves in mild differences in average house price growth.

The FNB City of Joburg Price Index rose by 7.2% year-on-year in the 1st quarter, compared to lower 3.5% rates of increase for both Tshwane and Ekurhuleni in the same quarter.

From our valuations activities in the region, our perception is that Gauteng’s market stability currently lies in and around its key City of Joburg  “Northern Suburbs” business nodes. The Northern Suburbs are not immune to recessionary shocks such as the one of 2008/9, but a greater shortage of land for development does assist in supporting the property values in these areas. In addition, during the mediocre economic performance of recent years, the economies of the region’s prime business nodes are believed to hold up better, as many corporates streamline costs by centralizing certain functions to head offices, many of which are in Joburg’s northern business nodes.

By comparison, our feeling is that the West Rand residential market doesn’t quite possess the market strength of the northern suburbs, possibly still dealing with supply overhangs created by a building boom of a few years ago, which we perceive have been far more extreme than the building boom of the northern suburbs, due to greater land availability in parts of the West Rand.
Looking forward, rising congestion and transport costs (helped on by possible SANRAL Toll Road implementation) are also likely to benefit Joburg’s northern suburbs relative to the other major regions of “Greater Johannesburg”,  as this  sub-region is arguably the province’s key commuter destination.

Finally, also a probable source of support for the overall City of Joburg residential market is the fact that this metro possesses the prime “former township” region around Soweto. Soweto has been at the forefront of the transformation from a “dormitory town” township to a more suburban-like character with major improvements in the area of retail and services. This is significantly improving its popularity as a place to live, which in turn is supporting the “township “ component of the City of Joburg’s property market.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 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.
    • 16 Nov 2017
      Cape Town’s popularity as a world-class tourist destination has resulted in a spike in the number of homes available for holiday lets and fuelled investor demand for sectional title units with short term rental potential.
    • 15 Nov 2017
      Sappi, one of South Africa’s oldest global companies and a leading global supplier of sustainable woodfibre products, has moved its global and regional headquarters to a new site on the corner of Oxford and 14th Avenue in Rosebank.
    • 15 Nov 2017
      There’s an old saying in real estate that you should seek to make a profit when you buy, not only when you sell – and a large part of succeeding at that endeavour is buying a home in an area with desirable features that will enhance the resale value of your property.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us