Deep down, mining-town markets may be in trouble
HOUSE price growth in South Africa’s mining towns has continued to underperform the national average as commodity prices cause the sector to shed jobs.
“This is unsurprising in goldmining towns especially, with a dying industry, and towns that are seldom diversified,” said FNB property sector strategist John Loos.
“It’s difficult to see a positive story for mining for the next few years. As a group these towns will underperform, but it’s not only mining — if you look at steel-producing towns like Vanderbijlpark, there are various stories of industry trouble, too.”
To a lesser extent, some of South Africa’ s manufacturingheavy cities may also see property prices begin to register difficulties, Loos said. Durban and Port Elizabeth might underperform Cape Town and the Gauteng metro areas as a result of, for example, a decline in vehicle sales.
Nodes such as the north of Durban might be resistant to the decline, however, because of the number of lifestyle and security estates attracting wealthy, retired buyers whose wealth is less directly connected to the economy, said Paul-Roux de Kock, analytics director at Lightstone.
Loos said: “Towns always have problems when they lose their dominant economic activity, such as the railways cutting back at junctions in places like Noupoort years ago. It can be severe.”
Although Rustenburg has been grappling with low demand — and low prices — in the platinum sector, De Kock said, median house prices had remained stable.
“But the more interesting statistic in conditions where industries fall flat is the number of sales in execution notices issued in that area. In Rustenburg specifically, in 2012 there were 118, and the number has climbed steadily to 137 in 2014. We expect higher for 2015. These are people who just cannot make bond payments any more and the banks take action.
“What often happens is that if a micro-economy booms, it reflects in house price growth quite quickly when highsalaried professionals like engineers move into the town, but when the market contracts it can take much longer to be reflected in prices. You see it much more quickly in metrics like sales in execution notices.”