Markets slow in top areas, but accelerate in cheaper suburbs

PROPERTY prices in Cape Town suburbs appear to be switching it up as price growth in the more expensive areas starts to slow but accelerate in more affordable suburbs.

This is according to FNB’s third quarter City of Cape Town Sub- Regional House Price Indices which, on the whole, revealed a gradually slowing price rate – albeit still strong – in the city.

The estimated average growth rate remained in double-digit territory at 11.4% year-on year which, while still strong, represents the fifth consecutive quarter of slowing from a 10-year high of 15.7% revised rate in the second quarter of last year, says FNB’s household and property sector strategist John Loos.

Furthermore, six of the 12 defined sub-regions saw their year-on-year growth slow in the third quarter of this year, three of these being the city’s three most expensive areas: the Atlantic seaboard, City Bowl and southern suburbs.

“Interestingly, certain of the major ‘affordable’ regions have shownhouse-price growth accelerations, perhaps highlighting the city’s residential affordability challenges – and resultant search for more affordable homes – after a strong price inflation run in recent years.

“Our FNB Estate Agent Survey continues to point to first-time buyers in Cape Town battling to buy homes far more than in other major cities of the country,” Loos says.

Although growth rates are still solid in the City Bowl, there were noticeable signs of a slowdown both there and the two closest areas.

These sub-regions are near the city and the mountain and have “run very hard” in recent years, resulting in the belief that the resultant home afford- ability challenges are contributing to a natural price-growth slowdown.

The “hot” and most expensive sub-region, the Atlantic seaboard, has seen its average house-price growth slow from a multi-year high of 26.5% yearon-year in the first quarter to 19.9% in the third quarter.

Loos says the City Bowl started its price-growth slowdown a little earlier, and has gone from its multi-year yearon-year growth high of 22.9% in the second quarter of last year to 15.1% by the third quarter of this year.

The southern suburbs showed the slowest average house price growth of the four major Cape Peninsula sub-regions, at 11.7% year-on-year, down from a multi-year high of 16.3% reached in the second quarter of 2015.

“The most affordable sub-region close to the City Bowl – this proximity being important given Cape Town’s mounting traffic congestion problems – is the near eastern suburbs sub-region which includes Salt River, Woodstock and Pinelands ( where the) average transaction price is estimated at R1.848 million.”

All three major northern suburbs sub- regions have seen their average house-price growth rates start to accelerate too.

From a 13.6% year-on-year house price growth rate in the final quarter of 2016, Loos says the western seaboard sub-region, including Blouberg, Milnerton and Melkbosstrand, saw its price-growth rate accelerate to 17.2% by the third quarter of 2017.

The Bellville- Parow and surroundings sub-region saw its price growth accelerate from 9.7% year-on-year in the final quarter of 2016 to 12.1% in the third quarter of 2017, while more recently the Durbanville-Kraaifontein-Brackenfell sub-region went from 8.8% growth in the second quarter of 2017 to 9.1% in the third quarter.

In a relatively strong property period, Loos says one can often see the higher- priced sub-regions leading the cycle, but as their affordability becomes a mounting challenge, the search for relative affordability can turn a portion of housing demand in the direction of more affordable sub-regions.

This can cause the more affordable regions to lag behind the cycle, with their house-price growth accelerating at a slightly later stage.

“It is possible that this is what we have begun to see in Cape Town’s major ‘affordable’ regions like the Cape Flats and the Elsies River-Blue Downs-Macassar regions.

“The former region’s yearon- year house- price growth has not accelerated recently, but appears to have held solid with its third quarter 2017 yearon-year growth at 10.8%.

“However, the latter region has seen a noticeable pricegrowth acceleration from a low of 5% year-on-year in the third quarter of 2015 to 17.5% exactly two years later,” Loos says. – Property Writer

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