Stronger house price growth predicted for 2014

While the average house price growth was nominally lower during 2013 than it was in 2012, the housing market is still moving in the right direction and prices are on an upward trend, says Adrian Goslett, CEO of RE/MAX of Southern Africa.
“The fact is that property remains a solid asset class that continues to provide buyers with a good return over the long term - provided the correct purchasing principals are applied to the transaction. Although property prices are currently only seeing single figure growth, the compound effect of the upward growth trend of property prices will positively impact on the homeowners net worth in the future,” says Goslett. “Potential property buyers who are waiting in the wings and holding out for the next boom are losing valuable growth as property prices increase yearly.”
According to the FNB Property Barometer’s House Price Index released on 7 January 2014, the average house price growth rose by 6.8% in 2013, compared with the 7.1% seen during 2012. “The important thing to remember when looking at figures like this is that although the growth percentage may be lower than the previous year, it is coming off the back of the previous positive growth. We have had two consecutive years of positive house price growth, which is remarkable considering that during the four years prior to 2012 the average real house price saw a decline. The positive growth points to the fact that the property market is moving in the right direction and showing an increased demand,” says Goslett.
Figures from the FNB Property Barometer state that the average price of homes transacted during 2013 was R891 976, compared with R835 480 in 2012. According to their data, these prices are way above the figures seen a decade ago, with the average real price for 2013 42.6% higher than the price seen in 2003. However, that said, the figure is still -18.5% lower than the price peak reached at the height of the boom in 2007. “This data reiterates that fact that property must be viewed as a long term investment. While homeowners who purchased their property a decade ago are seeing significant growth, those who purchased their property during the height of the boom are possibly still seeing a loss at the moment. However, those who are able to hold onto their property will recoup their losses and see returns on their investment in the future,” says Goslett.
Although the house price growth during 2013 may have not have been as high as 2012, the property market last year showed other areas of improvement. For example, the demand-supply balance showed an increase, rising by 3% on the average market strength level for 2012. This could lead to an accelerated house price growth percentage during 2014, especially considering figures show that residential building activity slowed in 2013. This will, in essence, further close the gap between supply and demand. “With demand for housing on the increase and a slow-down in building activity, more and more pressure will be placed on the current supply of property, which in turn will boost house prices. The increase in demand could be attributed to the fact that banks are relaxing their lending criteria, which has resulted in an increase in bond approvals in recent quarters,” says Goslett. “With more buyers entering the market and lower numbers of properties available, we are likely to see a more competitive property market in 2014, which will be advantageous for those wanting to sell their homes this year,” he concludes. 

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