Sunday Times

Deep down, mining-town markets may be in trouble

- BRENDAN PEACOCK

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.”

 ?? Picture: KEVIN SUTHERLAND ?? A SIGN: House prices are fairly steady in the platinum belt town of Rustenburg, but the number of sales in execution has been climbing
Picture: KEVIN SUTHERLAND A SIGN: House prices are fairly steady in the platinum belt town of Rustenburg, but the number of sales in execution has been climbing

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