Economy weighs heavily on housing market

Johannesburg – The difficult economic environment has weighed heavily on demand for housing and in turn impacted prices, the Standard Bank National House Price Index revealed.

On Thursday Standard Bank launched the monthly Provincial House Price Index (PHPI) and quarterly Regional House Price Index (RHPI) in order to supplement the national index. This is because housing supply and demand differs across regions, the report explained.

The PHPI and RHPI are expected to provide a more “comprehensive analysis” of residential property in the country given the regional price differentiation, said Andrew van der Hoven, Standard Bank’s head of home loans.

The PHPI differs from the national index in that it uses assessment value of properties. The national index relies on actual market prices. The PHPI measures price developments for residential properties sold in each province and which are financed by Standard Bank, the report indicated.

House prices ease

The national index indicated that the high unemployment rate, now at 27.7%, weighs heavily on household income growth. This has impacted growth in demand and supply of mortgages and subsequently, property price.

The PHPI shows a diverse performance of property prices, said Siphamandla Mkhwanazi, consumer economist at Standard Bank.

Gauteng

The PHPI revealed that the price recovery in Gauteng may be losing slack as the month-on-month growth in the median house price was 0.1% lower in May than in April. This may be because consumers are under increasing financial pressure, the report explained.

The median house price in Gauteng rose to R880 000, on a year-on-year basis this is 5.4%. The growth was driven by freehold properties, with flats and townhouses still under pressure, according to the report. The median price for a freestanding property was R920 00, and the median price of a flat or townhouse was R850 000.   

Western Cape

The PHPI showed the province is attracting “affluent” buyers, the report indicated. This is observed in the higher proportion of cash transactions. In turn, middle-income and first-time buyers may be taking a knock.

The median house price in Western Cape was R1.25m, this is 8.6% higher than the same period last year, said the report. Month-on-month this is down 0.5% from April, indicating a slowdown in house price growth.

The median price for a freestanding property in the Western Cape was R1.4m, and the median price for a flat or townhouse was R938 000.

KwaZulu-Natal

There was “subdued” performance in KwaZulu-Natal. The median house price in the region rose 4.8% year-on-year to R900 000, compared to 5.5% in April.

There was a 0.4% growth month-on-month. The median price of a freestanding house was R938 700, that of a flat or townhouse was R850 000.

“This month saw some renewed pressure on freestanding houses, which in the recent past have been enjoying popularity with affluent buyers,” the report stated.

Eastern Cape

There were signs of recovery in the Eastern Cape. The median house price was R822 500, up 6% year-on-year.

There was a decline of 0.2% for the month, compared to the growth of 0.7% reported in April. The median price of a freestanding house was R870 000. The median price of flats or townhouses was R687 500.  

Rest of the provinces

The Free State and North West both experienced house price deflation, but the North West is showing “signs of improvement” as house price growth is marginally below 0%, year-on-year, according to the report.

“Limpopo, Mpumalanga and the Northern Cape have recorded relatively stronger growth,” the report read. The median house price in these regions was R800 000 in April, with an average contraction of -0.3% year-on-year and month-on-month growth of 1%.

Regional performance

For the first quarter, the RHPI shows median prices in Johannesburg were up 6% for the year, and those in Cape Town were up 13.9%.

Trends how that Johannesburg showed signs of recovery and Cape Town continues to outperform but may be losing “steam”. Tshwane’s house price growth was at 8.8%, supported by strong demand by first-time buyers.

House prices in Ekurhuleni may be on its way to a recovery, eThekwini shows recovery but there is still pressure.

Prices have dropped “rapidly” in Nelson Mandela Bay. This may be attributed to the water crisis and the “dysfunctional” municipality.