Zero profits in posh suburbs
Don’t look for capital growth in luxury housing market
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