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House prices in major metro regions continue to increase
Dr Andrew Golding, chief executive of the Pam Golding Property (PGP) group, says ongoing trends of urbanisation, migration between provinces and the growing appeal of smaller, more centrally-located homes indicate that pockets of strength which are achieving vibrant growth will remain in certain sectors of the country's residential property market.
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Dr Golding was commenting in the latest Pam Golding Residential Property Index. "Even as regional house price growth appears to be slowing off the back of continued weak economic data, growth in house prices in many of the major metro regions continues to increase at a brisk pace.
"Given that these metro areas are the drivers of growth in provincial economies, a steady influx of people seeking economic opportunities means there is a steady demand for housing. Added to this, a lack of land within metro areas along with growing congestion which makes long daily commutes from far-flung suburbs difficult is resulting in South African metro areas becoming more concentrated."
Sectional title prices
"The increasing popularity of smaller more conveniently located property could explain the growth in sectional title prices which since late 2011, has accelerated slightly more rapidly when compared to freehold properties. Following a slowdown in freehold house price inflation in late 2014, sectional title property prices began to outperform freehold in April this year - for the first time since the 2008 recession. Although house price inflation in both categories is now moderating, healthy demand for sectional title properties means that prices for this category look set to remain somewhat more resilient," says Dr Golding.
"While national house price inflation continues to slow, easing to an annual growth rate of 5.3% in June 2015, the levelling off is quite gradual, with June's growth rate just 1.25% below the recent peak of 6.5% recorded in the third quarter of 2014. This modest easing is not surprising, given various factors such as rising price pressures, lack of consumer confidence and the prospect - and subsequent announcement - of higher interest rates."
The PGP says interesting trends are revealed within the various regions and price bands, with KwaZulu-Natal achieving impressive growth in both the lower and upper price bands, and with the lower price band nationally reflecting the strongest house price inflation - increasing by 8.5% in June and averaging 8.2% during the first half of the year.
KZN leading the way
While house price inflation in Gauteng continues to track the national average, both KZN and the Western Cape registered house price inflation of 7.3% in June, with house prices in the Cape leveling off at a faster rate than in KZN.
Although no longer the top performing region overall, in the lower price band KZN is clearly leading the way with an annual growth rate of 17.2% in June. This is significantly higher than house price inflation of 11.9% in the lower price band in the Western Cape and 5.2% in Gauteng.
In the upper price band, the PGP Index reports that house prices in the upper price band above R3m continue to trail behind the national average. In June house prices in this category declined by 2.7% from year earlier levels following a 0.4% decline in May. This is the first time since the 2008/9 recession that house price inflation in this band has slipped into negative territory.
