Zero prof­its in posh sub­urbs

Don’t look for cap­i­tal growth in lux­ury hous­ing mar­ket

Finweek English Edition - - Insight -

IN­VESTORS keen to make money from res­i­den­tial bricks and mor­tar over the next two years should not be plac­ing big bets on well-heeled sub­urbs where houses typ­i­cally trade be­tween R3m and R12m.

In fact, some in­dus­try play­ers say up­per end house prices are likely to take a fur­ther beat­ing this year and next, as af­ford­abil­ity is­sues con­tinue to force South Africans to forego large man­sions in lieu of cheaper, smaller abodes.

Lat­est Absa data show that the lux­ury end is the only sec­tor of the over­all hous­ing mar­ket where prices are still fall­ing. Absa’s in­dex for the up­per end, priced be­tween R3,1m and R11,5m, was down 1,8% in sec­ond quar­ter 2010 year-on-year to an av­er­age R4, 4m – the fourth con­sec­u­tive quar­ter that lux­ury house prices have been fall­ing.

That’s in stark con­trast to the mid­dle seg­ment of the mar­ket, priced be­tween R430 000 and R3,1m, where prices rose by a ro­bust 14,4% in sec­ond quar­ter 2010 to an av­er­age R1 075 600. Mid­dle-seg­ment house prices have been back in pos­i­tive growth ter­ri­tory since mid-2009.

Absa se­nior prop­erty an­a­lyst Jac­ques du Toit as­cribes the poor per­for­mance of the lux­ury hous­ing mar­ket pri­mar­ily to af­ford­abil­ity is­sues. He says there is no doubt that

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