Pam Golding research report shows slow-down in property market

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“It is important to remember that the performance of the national housing market disguises a diverse range of trends at a regional, metro and suburban level,” says Dr Andrew Golding, CE of the Pam Golding Property Group.

He notes that the performance of the national housing market is largely a reflection of the trends in the housing markets of the three major regions, Gauteng, KZN and the Western Cape. In these markets, the performance of the regional economy, coupled with local demographic trends, ultimately determines both the level of activity and the rate of house price inflation.

In Gauteng, for example, the regional market’s relative under-performance is at least partially attributable to weak growth in the housing markets of towns in which the mining and manufacturing sectors, both of which are currently performing poorly, are dominant.

Largest housing market

Being home to South Africa’s largest regional housing market, accounting for some 34% of the total national housing stock, as well as approximately 40% of the country’s manufacturing, developments within the Gauteng market have a significant impact on the national performance of the housing market.

“In contrast, housing markets in and around the metro hubs of Pretoria and Sandton continue to enjoy vibrant growth, as does the burgeoning KwaZulu-Natal North Coast node and the increasingly sought after Cape Town Metro. Growing congestion in the above-mentioned Gauteng areas, coupled with improved public transport, is allowing neighbouring suburbs which offer accessibility and affordability to also benefit from robust buyer demand," Dr Golding says.

“While in-migration and a stock shortage ensure that the Western Cape remains the top performing regional economy, an increasingly affluent middle class is also fuelling a rebound in the Eastern Cape’s metro markets.

“All these examples highlight the importance of understanding the unique factors driving regional and metro housing markets, rather than focusing purely on the performance of the national market. And with house price inflation slowing, savvy buyers are relying on location to find growth."

Lack of supply

“Despite cooling, the market retains resilience with ongoing demand for housing underpinning this characteristic even through sluggish economic trading conditions. For example, activity in the below R1m price range still seems to be limited mainly by a lack of supply and not a lack of demand.”

The research report says during the first half of 2015, the residential market’s total unit sales declined by 8% while national house price inflation averaged 5.8% during 2015 as a whole.

In comparison and bucking the national trend, the Pam Golding Property Group concluded sales of R20bn - recorded for the financial year from March 2015 to the end of February 2016, reflecting a meaningful increase in both units and sales turnover of 12%, while turnover of R2.13bn for the month of February 2016 reflects notable growth in group turnover of 19% over February 2015.

The Study says while the housing markets in Gauteng’s mining and manufacturing towns experienced subdued growth last year, the markets in major metro areas, which are more reliant on the more diverse and resilient services industries, have continued to flourish.

A prime example is Sandton, which remains the financial and commercial powerhouse of Gauteng and the national economy. Despite several years of rapid development there are still some 200,000m² of commercial office space still at various stages of completion. As a result, demand for residential accommodation in and around the Sandton city centre continues to grow and flourish.

Sharp price increases

An influx of new residents into Johannesburg and Pretoria has resulted in sharp increases in house prices, which is prompting some buyers to look further afield to areas like Midrand, which is equidistant from Pretoria and Johannesburg and with an easy commute via the Gautrain, is appealing for many residential property buyers. According to Lightstone, Midrand may well become one of the most densely populated areas in South Africa within the next 30 years.

According to the Pam Golding Residential Property Index, house price inflation in the lower price segment (below R1m) has been outperforming all other price categories since early 2015. This continued into early 2016, with an increase in prices in this category of 9.4% above year earlier levels.

During 2015 as a whole, this category recorded an increase of 7% - compared to the national average of 5.8%. However, within the affordable sector - defined by Lightstone as homes valued at under R0.25m - house prices have risen by a staggering 28.5% during the first ten months of 2015 (latest available data).