House prices show growth in affordable segment

In February, house prices grew to 4.2% year-on-year (y/y) from 3.9% y/y in January, according to the FNB Property Barometer.

Pam Golding Properties is selling a three-bedroom home in Terenure Gauteng for R950,000.

However, on a month-on-month basis, price growth continues to be slow, and is likely reflective of the tapering of interest rate-induced demand.

FNB senior economist, Siphamandla Mkhwanazi, says that although recent data shows better-than-expected house price growth, selling due to financial pressure keeps increasing.

Siphamandla Mkhwanazi

“Properties priced below R500,000 grew by 4.0%, and we see slowing buyer demand mainly in the middle-price segments of the market. In the context of the February data, we looked at homes priced between R750,000 – R1.8m,” says Mkhwanazi.

Demand is expected to remain slow in the first quarter of 2021. Bigger and mainly freehold properties are popular with buyers as a result of the demands of remote working, and the need for conducive working environments.

According to Mkhwanazi, the inherent stock shortages will likely keep property values afloat. Estate agents operating the affordable segments still see demand outstripping available supply.

Lightstone data revealed that house prices rose by an average of 3.05% in 2020, while the Pam Golding Residential Property Index registered an average increase of 3.2%.

Dr Andrew Golding, chief executive of the Pam Golding Property group, says this was in line with the consumer inflation rate (which averaged 3.3% in 2020), and exceeded the average increase in national house prices of 2.7% (PGP Index) recorded in 2019.

“Currently, and according to the Pam Golding Residential Property Index, house price inflation continues to rebound – rising from 2.5% in April 2019 to 4.1% in February 2021. The recovery in house prices is showing no sign of losing momentum.”

Dr Golding says KwaZulu-Natal leads the recovery with +5.4% in February 2021, followed by Gauteng (+4.8%) and the Western Cape (+4.7%).

Furthermore, the Pam Golding Residential Property Index shows that properties priced below R1m have been on an upward trend since mid-2020, reaching 6.8% from year-earlier levels in February 2021.

“While growth in freehold house prices outperformed relative to sectional title units in 2020 – perhaps influenced by the desire by many to relocate to more spacious properties as a result of the lockdown restrictions, the gap is now rapidly narrowing as growth in sectional title prices accelerates,” Dr Golding adds.

Edited by Gudrun Kaiser

The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Safrea or its members.


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