South African house price growth gives reason for optimism

Van Alphen listed four sets of figures from the latest Absa Housing Review, all of which, he said, give grounds for confidence. These are:

• Nominal house price growth in middle segment homes (80m² to 400m²) grew by over 10% in the first quarter of 2012 and, although this rate is unlikely to be sustained, the gains have been significant and will continue at 8% per annum.
  
• Affordable housing (40m² to 7m²) real price growth has since early 2012 been just above 5% per annum and could well continue at this rate for the year to come.

  "It has, of course, to be admitted by way of contrast, that luxury homes (those priced above R3.8 million in Absa's Housing Review) continue to show negative growth year-on-year, but this is less than 10% of the total market," said van Alphen.
  

• Growth in household disposable income is now at around 7.5% and the ratio of household savings to disposable income is now slightly improved.

  "The improvement," said Van Alphen, "is unlikely to boost home buying by a large amount, but it is worth recording that we are at last seeing the outstanding household debt to disposable income ratio stabilising at around the 75% mark and the ongoing low interest rates still makes it a great deal easier to service debt. Home buying will, therefore, remain steady in the coming year.
  

• The cost of building a new home, said Van Alphen, has dropped drastically over the last three years and it is now rising at only 5.4%, i.e. roughly in line with the national inflation rate. A surge in new home buying in the next 12 months is, therefore, likely to be seen - and in fact is already evident in areas such as Brackenfell in Cape Town.
  "Those who are gloomy about housing prospects," said van Alphen, "all too often base their opinions on what they see happening in the upper-middle and upper-bracket homes. One needs, however, to look at the total market to get the true picture."

The almost intense activity in the R500 000 to R1 million bracket, added Van Alphen, is clearly visible in the figures acquired from many of the Rawson Property Group's franchisees, which his finance division services.

"It is now quite clear," said Van Alphen, "that a very large proportion of the increased turnover achieved by the Rawson Property Group year-on-year has been driven by sales in the lower-middle and lower brackets, and I can see no reason for thinking that this will not continue."