Weekend Argus (Saturday Edition)
Cape Town records SA’s biggest house-price growth rate, and comes in 31st in a world index
CAPE Town has finished in 31st position in the latest Knight Frank Global Residential Cities Index, after continuing to record the country’s biggest house-price growth rate.
The global trend over the past three quarters has seen a decline in annual house-price growth in most of the 150 cities surveyed, says Anne Porter, chairman of Knight Frank Residential, South Africa.
“Cape Town has continued to perform well in this context, registering growth of 8.4% to end September 2017.”
Reykjavik in Iceland topped the rankings with house-price growth of 21.3% from Q3 2016 to Q3 2017. It is also the only city of the 150 tracked where annual house- price growth exceeded 20% in the year to September 2017.
The report reveals Toronto in Canada dropped from top spot to fourth place, having seen a decline in its year-on- year growth rate from 29% to 18%.
“Some of the largest risers through the rankings include Amsterdam and Utrecht in the Netherlands. However, this is largely due to declining growth rates of others, notably Indian and Chinese cities.
“The overall index increased by 4.7% in the year to September 2017, down from 5.8% last quarter, which continues the trend of declining house- price growth globally seen last quarter.”
Only one city, compared to last quarter’s nine, recorded house-price growth above 20%, and the number seeing growth above 10% has almost halved from 41 to 22, the report says.
Meanwhile, South Africa’s house-price growth pointed to a stronger start this year, even though 2017 showed annual growth declining. The FNB House- Price Index showed total growth throughout 2017 was 3.7%, a slowing on 2016. However, monthly house-price growth has been accelerating recently, pointing to a stronger start to 2018.
In the report FNB’s John Loos says leading economic indicators suggest growth could receive “slightly more support” from the economy this year, compared to 2017.
“(2017) was the third consecutive year of national average house-price growth slowdown. From a multi-year high of 7% in 2014, the FNB HousePrice Index’s average annual growth slowed to 4.8% in 2016 and to 3.7% in 2017.”
At the beginning of 2017, average house-price growth of 3% was predicted.
Loos says when examining the FNB House-Price Index performance on a monthly basis, one sees it showed gradual year-on-year growth strengthening as the year progressed, having hit “rock bottom” growth late in 2016.
He says the average price of homes transacted in December was about R1.1 million.
“Examining house- price growth on a month-on-month seasonally- adjusted basis, a better indicator of very recent price growth momentum than year-on-year rates, we saw an early-2016 high, followed by a dip around mid-year, and then acceleration in the revised month-on-month growth rates right at the end of the year. December 2017 closed at 0.72% month-on-month growth.
“The prior dip in monthon-month house-price growth coincided broadly with a dip in another key leading economic indicator, the Manufacturing Purchasing Managers’ Index. (But) in recent months the latter indicator has also been moving higher, both perhaps pointing to signs of a slightly stronger economy going into 2018.”
Loos believes after the past three years of slowing, 2017 could see a slightly stronger growth rate.
He says: “Predictions are never without risks. Much will depend on the political and government policy environment, with 2018 the run-up to the 2019 general election.”
Ratings agency downgrades for the country, should they occur, can dampen national sentiment, and this can feed into a housing market either directly, or indirectly via the economic impact, he says. In addition, drought conditions, notably in the Western Cape, can impact on regional economies which feed into those housing markets.
“So much will depend on weather patterns in certain parts of the country this year, especially in the Western Cape, which is a prime property market,” Loos says.