Many South African residential precincts' price growth way ahead of the national averages

Reading the many well-researched analyses of South African house price movements, it is possible to get the impression that this is an asset class without exciting potential – but that would be a mistake, says Mike van Alphen, National Manager of Rawson Finance, the Rawson Property Group’s bond origination division.

“The June Absa home sales breakdown, for example, reveals that average nominal annual house price growth over the last nine months was between 9% and 10%.  The report then mentions, too, that headline consumer inflation is forecasted to stay above 6% for the rest of this year and that, with an anticipated interest rate hike of 50 basis points in September, the prime bank lending rate is likely to be 9,5%.”

It has to be realized that, the figures quoted by the national lending groups are national averages, said van Alphen.

“In almost all economic conditions, even the worst, there tend to be some high performing pockets where price growth remains stable and price growth is assured.  Investment in these areas, obviously, is always highly satisfactory.”

One of the more interesting research exercises that a potential residential property investor should undertake, said van Alphen, is to gain access to Deeds Office figures for recognised high demand areas. Any competent and hands-on agent will have access to these figures through Lightstone and other analysts.

“In the Cape Town central peninsula suburb of Rondebosch, for example,” said van Alphen, “the upward curve of the price graph has remained constant for almost every year since 2004, with only a very slight dip in 2010.  The price of freehold homes in Rondebosch rose in that period from an average of R1,345,000 to R2,960,000 – and they are definitely still rising.

“In the lower priced Greater Cape Town suburb of Brackenfell, where residential development is now rapid and on-going, the rise over the same period for freehold homes has been from R322,000 to R1,104,000.”

“In the Johannesburg suburb of Dainfern, a very upmarket area, the increase, although by no means steady year-by-year, has been from R2,198,000 to R4,495,000 this year.”

Many other examples from all over South Africa, said van Alphen, could be found – and he added that certain new multi-unit sectional title developments in the recognized high demand areas have been giving particularly good returns, way ahead of freehold homes.

“Just as one has to be selective with share purchases, so one has to be careful about where and when they buy.  For those who take sound advice and learn to identify the areas in demand, residential property is and will remain a very sound investment.”

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