House prices now in decline
House price growth on Cape Town’s Atlantic Seaboard has decelerated further, with prices up just 1.94% year-on-year in the second quarter.
This is less than half the revised first quarter figure of 4.43%, according to FNB’s House Price Index, and a sharp drop from the multiyear high of 27.7% year-onyear in Q4 2016.
Include the impact of inflation, at an average of 4.5% in Q2, and prices in the area, which stretches from Green Point through Sea Point and Clifton to Hout Bay, are in decline. Use the consumer price inflation number for the Western Cape in particular, which runs at nearly one percentage point ahead of the national figure (5.4% in June, versus the overall Stats SA figure of 4.6%), and the picture looks even more worrying.
Nine out of 12 subregions tracked by John Loos in FNB’s City of Cape Town House Price Indices saw slowing price growth in the quarter. Of the four key regions – the Atlantic Seaboard, City Bowl, Southern Suburbs and Near Eastern Suburbs – only one saw house price growth accelerate in the quarter.
What FNB terms “Near Eastern Suburbs”, which includes Woodstock, Salt River and Pinelands, saw prices up 17.57% year-on-year in the quarter.
Loos says these suburbs are the “most affordable … of those adjacent to the City Bowl”, and with traffic congestion in the metro getting progressively worse, its proximity to the city makes it attractive.
Woodstock, especially, has seen a large number of new residential property developments in recent years, and Loos says these “can contribute” to good price growth.
“And after major affordability deteriorations in City Bowl and Atlantic Seaboard homes, the Near Eastern Suburbs’ attractiveness for property investors may have increased significantly.”
However, he says “while this region’s price growth has held up better than the other three subregions in close proximity, we believe this is a mere lag, and ultimately the more affordable sub-regions [will] begin to follow the slowing price growth trend with a lag”.
The trend of demand shifting to northern regions, such as Durbanville, Bellville and Blouberg, has slowed, too, as home affordability has deteriorated “significantly” in these areas. This slowing started in the first quarter and continued into the second.