House price growth best in Western Cape but slowing

THE WESTERN Cape’s house price growth has tapered further, yet it still remains the strongest of the major regions.

The region continued to have – by a significant margin – the fastest average house price growth in the first quarter, compared to the rest of the country’s major residential regions, according to John Loos, FNB’s household and property sector strategist.

However, mounting affordability challenges in the Western Cape are believed to have caused slowing in its house price growth in recent quarters.

The FNB House Price Indices for the country’s major regions shows slowing price growth in the country’s star-performing region, the Western Cape, continued in the first quarter of this year. The yearon-year average house price growth for the province was 6.2% in the first quarter – slower than the 7.7% rate of the previous quarter and now significantly slower than the 10.6% multi-year high recorded in the first quarter of last year.

However, the Western Cape’s average house price growth for the first quarter remained well above other major regions, the next fastest growth rate being 1.1% year-on-year growth in the FNB Smaller 5 Provinces House Price Index (Mpumalanga, North West, Limpopo, Free State and Northern Cape). This was followed by KwaZulu-Natal with 1% growth, Gauteng with 0.7%, and Eastern Cape with a negative -1% rate.

“Despite the Western Cape hav- ing done very well in recent years in terms of confidence in the region and its ability to attract middle to higher-income repeat home buyers from other major regions, ultimately, the strong real house price growth in much of this region should lead to a mounting affordability challenge and we believe that this may have been happening in recent quarters,” says Loos.

Such an affordability challenge would be more relevant for firsttime buyers as opposed to financially stronger repeat home buyers. The FNB Estate Agent Survey has for some time pointed to a low rate of first-time home buying in the Cape Town metro.

First-time home buyers in the city are believed to have made up 8% of total home buyers during the two summer quarters of 2016/17. Joburg’s estimate was a far higher 27% and Tshwane a healthy 21%.

“It is in this first-time buying percentage that we believe we are seeing indications of a greater affordability challenge in the Western Cape, as opposed to the other slower moving major residential markets,” says Loos.

Comparing the average price of homes transacted, the Western Cape is the most expensive province, with an average price of R1.421 million. Gauteng is next at R1.041m.

Since the beginning of 2010 (the start of the post-2008/9 recession recovery), the average house price for the Western Cape has risen cumulatively by 78.2%. The next strongest growth was in KZN, with 46.4% and Gauteng with 41.2%.

The Cape Town metro has been a major driver in the Western Cape, says Loos.

“Examining our FNB Major Metro House Price Indices, we see the slowest ones in the fourth quarter of 2016 to have been Nelson Mandela Bay with a -0.8% year-on-year decline and Ethekwini with +0.2% change.

“At the top end of the growth scale, Cape Town’s 8.2% year-onyear rate continues to be a major driving force behind the broader Western Cape house price growth.

The Tshwane metro, although not experiencing significant house price growth, appears to have a vibrant market with the lowest average time of homes on the market – 10.14 weeks. This average beats Cape Town’s estimated 13.14 weeks.