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Little evidence of house price bubble

Cape Town - While the increase in housing prices in South Africa gathered momentum during the first half of 2014, the pace has slowed in recent months, according to Dr Andrew Golding, CEO of the Pam Golding Property Group.

"The slowing pace is reflecting the growing pressure on household disposable income, the impact of the recent, albeit modest interest rate hikes and the renewed slump in business and consumer confidence," said Golding.

"South African house prices have risen strongly since the 2008 recession ended, supported by the SA Reserve Bank’s aggressive interest rate cuts in response to the global financial crisis."

There is, however, little evidence of a residential housing bubble and when adjusting for inflation, the increase in real prices since the end of the 2008 recession is marginal.

"In fact, when comparing house prices against disposable income and rental, the South African residential market is estimated to be broadly in line with its long term average - that is neither over nor undervalued," said Golding.

"And looking ahead, expectations of a modest strengthening in economic growth, coupled with an easing in the inflation rate and a very gradual series of interest rate hikes, the outlook for the residential market is positive."

Record sales in October

Sales turnover of the Pam Golding Property group sales turnover continues to increase by in excess of 20% year-on-year for the third year in succession.

In October the group concluded total sales of almost R1.83bn - its highest monthly sales turnover ever achieved. The group is anticipating total sales for the year ending February 2015 of R18bn.

Greatest demand

Pam Golding Properties experience the greatest demand for homes across the various price sectors to be in the price band from R1.5m to R6m, accounting for just over 52% of its total sales and split almost evenly between the R1.5m to R3m and R3m to R6m price bands) in rand terms for the past 12 months.

The R3m plus price band has led the market in terms of relative house price growth.

"Our view is that this segment comprised a relatively higher proportion of cash sales than lower price bands, and being significantly above the national average selling price of a home in South Africa of approximately R900 000, is a relatively affluent sector," said Golding.

"This has enabled the upper sector to transact through challenging economic times, in the process creating some buyer demand relative to supply and therefore achieving house price growth at a faster rate than other segments."

Stock shortages are now being widely experienced in regions and areas around the country - particularly in metro areas and popular hubs - and in all price bands.

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