Gauteng leads the way in house price slowdown | Fin24
 
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Gauteng leads the way in house price slowdown

Oct 24 2016 19:13
Carin Smith

Cape Town - Gauteng has been leading the way to slower average house price growth among the major property regions in South Africa for some years now, the FNB Major Regions House Price Indices show.

Its year-on-year rate of increase reached a lowly 2.1% in the third quarter of 2016. This is further down from the 2.7% rate for the previous quarter, having slowed all the way from a 9.3% high at the end of 2012.

While the Western Cape remains the most expensive province, with an average house price of R1 256 372, Gauteng is in second spot with an average price of R1 016 804 and KwaZulu Natal (KZN) in third with R988 142. Gauteng had the highest per capita income basis, estimated at R72 951 in 2015.

Gauteng was the most affordable of the major regions in 2015, with an estimated average house price/per household income ratio of 4.44. The Western Cape is the second most affordable region with a ratio of 5.11, while the least affordable of the major provinces is the Eastern Cape, with a high average price/per household income ratio of 6.13 in 2015.

Gauteng is, however, not the weakest in terms of house price growth when compared to all the regions in SA. The FNB Minor Provinces House Price Index - including Mpumalanga, the Free State, the Northern Cape, North West and Limpopo - rose by a mere 0.8% year-on-year in the third quarter, while the Eastern Cape had the slowest growth rate of 0.1%.

READ: House price inflation slows - index

Slightly stronger than Gauteng was KZN, with a house price growth rate of 4.2% year-on-year, although also on a slowing trend.

John Loos, household and property sector strategist at FNB, told Fin24 that if one looks at house price growth in some of the smaller provinces, the market could possibly have been affected by the drought, for instance.

He also thinks markets in smaller regions where there is a big holiday component could have been affected by current economic conditions.

"In a weaker economy the demand is mainly about primary housing. On the one hand you might see some relief from the impact of the drought, but holiday towns and smaller regions might take more strain," explained Loos.

"In the minor provinces the other negative impact on house prices has been the mining sector that has not done so well in last few years."

READ: Middle-segment house price growth lowest in 4 years

Loos said in a slowing of house price growth one might have to look at the major cities as places with the greatest stabilities. This does not mean the metros will get away from a slowing house price growth cycle.

Loos told Fin24 that in Gauteng the FNB Estate Agents Survey seems to indicate that Tshwane is the stronger in terms of house price growth.

"None of the areas in Gauteng have been wonderful in house price growth, but the eastern suburbs of Tshwane seem to have become a popular area for commuters who work in Johannesburg. The Gautrain might have helped this tendency too, but one can't say for certain," said Loos.

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fnb  |  sa economy  |  house prices  |  house price growth  |  property
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