Increase in home values outpaced by inflation this year
But coastal and estate prices buck the trend
RESIDENTIAL property owners can expect their homes, or apartments, estate or holiday cottages in which they invested, to grow below inflation this year, with prices slowing even further over the next two years.
While there will be certain cities and property types that will maintain above-inflation price growth — particularly luxury suburbs in metro areas — the top end of the market is leading the downturn, with the middle and lower tiers to follow, as increasing pressure on budgets means families are less likely to be able to scale up their primary residence.
Transaction trend data from property analytics company Lightstone make compelling reading in a residential property market that reflects the deep income and wealth divisions in the economy.
According to Lightstone’s analytics director, Paul-Roux de Kock, after residential property price growth declined from 5.8% halfway through 2015 to 5.5% at the end of 2015, the best-case scenario for 2016 is growth of 4.6%. The base-case prediction given our economic growth rate is predicted to be 3.5%, and the worst-case recession scenario is likely to be 2.5%.
Consumer price inflation was at 6.2% in January this year.
Growth in value in houses and apartments on the coast has outstripped price inflation inland, with Cape Town again the star performer.
Analysing luxury suburb performance by metro, in Johannesburg the price performance last year shows property prices in Sandown roughly appreciated 10%, with Parkmore, Strathavon, Fourways and Bryanston providing a curve down to 7%.
In Tshwane, Rua Vista returned 8% growth, followed by Monument Park, Doringkloof, Bronberg and Wingate Park, which brought up the rear at 6.8% in the upmarket segment.
In Durban, La Lucia led a North Coast run at 8%, with a spread down to 6% that includes Mount Edgecombe, Durban North, Umhlanga Rocks and Kloof to the west.
Cape Town’s Green Point saw property owners achieve an average of 12% price growth, with Rondebosch, Sea Point, Gardens and Claremont providing a gradual spread down to growth of 8%.
According to De Kock, Durban’s house price growth has been subdued, due in part to the “semigration” trend that has seen Gauteng sellers buying in coastal areas — but while they are buying primary homes in the Western Cape, they’re buying second homes in Durban, and this segment is not performing.
Luxury, lifestyle, golf, equestrian and wildlife estates seem to be resisting the downward trend in the luxury segment, with a continuing rise in transaction volumes and less of a downturn in prices compared with their freehold counterparts.
Estate homes have an average price — at R2-million — nearly three times the national average and are more likely to be mortgaged, since many estates are new and owners have not had time to pay off bonds.
FNB household and property sector strategist John Loos agreed that denser urban development of sectional-title homes near public transport routes — rather than urban sprawl — and estate developments would drive most of the future price growth in the residential market, given cities’ worsening congestion problems and the continued move towards higher-security homes.