Luxury home sales sluggish

GO-SLOW: SEGMENT LEADS RECENT HOUSE PRICE SLOWDOWN

High-end homes’ average time on the market has spiked to the highest in at least the last decade.

While ‘upper-end’ homes tend to stay on the market for longer on average than those in the lower-priced end, there has been a noticeable divergence in the market – FNB report.

The average time on the market for luxury homes has spiked to the highest in at least the last decade, with houses in this high-net-worth segment now spending 23.29 weeks “for sale”.

This is a sharp increase over the past year, and a nearly 50% jump from the 15.86 weeks on average from 2014. According to FNB’s estate agent survey, the average house price in this segment is just over R7 million.

That includes suburbs like Bryanston, Dainfern, Waterfall, Waterkloof, areas just north of Durban, parts of the Atlantic Seaboard, and Cape Town’s southern suburbs.

FNB says there has been a “significant” increase in the average time on the market in the ‘upper-income area’ segment, with an average price of about R3.5 million, from 13.36 weeks in 2014, to 16.38 weeks in the first three quarters of 2017.

Meanwhile, in 2014, the “lower-income” area segment (R1.26 million average value) spent an average 11.54 weeks on the market. This shortened to 8.81 weeks for 2017’s first three quarters. Middle-income areas (R1.6 million average price) saw an average 10.18 weeks in 2014 grow to 11.43 weeks in 2017’s first three quarters.

Linked to this, there has been a sharp deceleration in house price inflation in the luxury segment since 2016’s first quarter (Q1):

Lightstone Property’s October house price index data shows upper-end prices dropped 0.1% year-on-year (y/y), on average, in September.

Price growth has been running below 2% for the last six months and the year-to-date average for nine months is 1.6% (2014: 7.4%, 2015: 6.1%, 2016: 4.2%).

FNB’s area value band house price index shows a similar trend. Whereas Lightstone divides the market into four segments, FNB’s luxury area quintile is the group of areas with the highest transaction price averages, “making up 20% of the total volume of property transactions by individuals”. Here, the average house price is R2.271 million.

Year-on-year price growth slowed from 6.1% in Q2 2017 to 5.3% in Q3. Note, CPI is around 5%.

“The most significant y/y house price growth slowing in recent years has been in the luxury area value band, from an 11.1% high back in the final quarter of 2014 to the most recent 5.3%,” writes

FNB’s John Loos.

Compared to the lower-, middleand high-value segments, it’s easy to see just how under pressure the upper-end is. In fact, in the lower two quartiles, price inflation has been accelerating this year.

Loos says: “The result is, on average, a more financially cautious household searching for greater home affordability, which should mean some shift in demand towards the more affordable areas of the market.”

Hilton Tarrant works at immedia.