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Johannesburg - Property in more affordable metro areas, particularly former black townships, performed best in price growth in 2010, the FNB Property Barometer released on Thursday shows.
"In 2010, the more affordable metro areas performed better than the higher-priced segments, with former black townships seemingly the best price growth performers," said FNB Home Loans strategist John Loos.
The Major Metro Former Black Township House Price Index - with an average house price of R258 334 - showed a 20% increase in the average value of homes traded in the fourth quarter of 2010.
The Affordable Area Index - which includes areas from all former race classifications and with an average price of R375 219 - grew by 11%.
The Middle Income Areas index - with an average house price of R730 064 - grew by 9.1%.
This was followed by the High Income Areas index - average price of R1 105 750 - growing by 8.8%.
The Top End - average price R1 908 986 - was the weakest performer with growth of 7.7%.
When it came to quarter-on-quarter growth, the Township index peaked at 4.9% in the third quarter of last year.
This slowed to 4.5% in the fourth quarter, with the "positive impact of the rapid interest rate reductions up to August 2009 beginning to wear thin".
"One saw a broad flattening out of the other four segment indices in the fourth quarter as well, at lower levels than the Township Index growth peak," Loos said.
The FNB Estate Agent Survey over the past few years had shown that more sellers were selling to downscale due to financial pressure compared to those upgrading.
"The agent surveys also suggested that the so-called black population group mildly increased its share of total buying in 2010."
Loos said this made sense as the Bureau of Market Research in 2009 estimated that black households with incomes under R500 000 a year had significantly lower levels of indebtedness compared to other race groups.
"And, being the group with the lowest per capita income, the black group's residential demand is biased towards the lower priced end."
Loos said these factors meant that the lower end of the market would have outperformed the higher priced end.
Information from the FNB valuers suggested that lower income areas were less oversupplied than the middle income and upper income areas.
Based on Deeds Office data for all property transactions for individuals, Loos said there appeared to be superior price growth performance at the lower end of the market.
In addition, former black townships in the six metros had outperformed the rest of the areas in 2010.
Loos warned that while former black townships had performed well during their “normalisation” process of the past decade, they must now be viewed as "normal residential markets where prices can perform very well at times, but where price declines can occur during times of higher interest rates, a weak economy, and weak demand".
The barometer also showed that holiday areas underperformed compared to major metros.
"Whereas the fourth-quarter average price growth in the major metro areas was 8.6% (although starting to flatten out), the Holiday Town Index found itself in year-on-year decline to the tune of -5.9%," Loos said.
This was due to the "non-essential nature of holiday buying".
"In 2010, the more affordable metro areas performed better than the higher-priced segments, with former black townships seemingly the best price growth performers," said FNB Home Loans strategist John Loos.
The Major Metro Former Black Township House Price Index - with an average house price of R258 334 - showed a 20% increase in the average value of homes traded in the fourth quarter of 2010.
The Affordable Area Index - which includes areas from all former race classifications and with an average price of R375 219 - grew by 11%.
The Middle Income Areas index - with an average house price of R730 064 - grew by 9.1%.
This was followed by the High Income Areas index - average price of R1 105 750 - growing by 8.8%.
The Top End - average price R1 908 986 - was the weakest performer with growth of 7.7%.
When it came to quarter-on-quarter growth, the Township index peaked at 4.9% in the third quarter of last year.
This slowed to 4.5% in the fourth quarter, with the "positive impact of the rapid interest rate reductions up to August 2009 beginning to wear thin".
"One saw a broad flattening out of the other four segment indices in the fourth quarter as well, at lower levels than the Township Index growth peak," Loos said.
The FNB Estate Agent Survey over the past few years had shown that more sellers were selling to downscale due to financial pressure compared to those upgrading.
"The agent surveys also suggested that the so-called black population group mildly increased its share of total buying in 2010."
Loos said this made sense as the Bureau of Market Research in 2009 estimated that black households with incomes under R500 000 a year had significantly lower levels of indebtedness compared to other race groups.
"And, being the group with the lowest per capita income, the black group's residential demand is biased towards the lower priced end."
Loos said these factors meant that the lower end of the market would have outperformed the higher priced end.
Information from the FNB valuers suggested that lower income areas were less oversupplied than the middle income and upper income areas.
Based on Deeds Office data for all property transactions for individuals, Loos said there appeared to be superior price growth performance at the lower end of the market.
In addition, former black townships in the six metros had outperformed the rest of the areas in 2010.
Loos warned that while former black townships had performed well during their “normalisation” process of the past decade, they must now be viewed as "normal residential markets where prices can perform very well at times, but where price declines can occur during times of higher interest rates, a weak economy, and weak demand".
The barometer also showed that holiday areas underperformed compared to major metros.
"Whereas the fourth-quarter average price growth in the major metro areas was 8.6% (although starting to flatten out), the Holiday Town Index found itself in year-on-year decline to the tune of -5.9%," Loos said.
This was due to the "non-essential nature of holiday buying".
