Why most house prices continue to climb in South Africa
- The average house price in South Africa increased by more than 2% in the year to end-August.
- Prices of houses above R1.5 million were flat, however, new data from Lightstone Property shows.
- Eastern Cape, Kwazulu-Natal and Mpumalanga have seen strong house price momentum.
- For more articles, go to www.businessinsider.co.za.
South African house prices continue to confound expectations of a slump even as the pandemic wreaks havoc on the local economy.
South Africa is not unusual – across the world, property prices have been surprisingly buoyant. Record low interest rates, and the urgent need to upgrade to a bigger property after being stuck within the same four walls during lockdown, have contributed to this trend.
South African house prices increased by 2.1% over the year to end-August, according to the latest data from research group Lightstone Property.
House price growth has remained above 2% for the past two months – a far cry from initial forecasts that that prices could fall by as more than 10% this year due to the coronavirus pandemic, which effectively shut down the property market for months, and triggered widespread job losses.
Instead, prices of properties below R700,000 have increased by more than 4%. More expensive properties have increased by around 2%, while house prices for properties above R1.5 million remained flat after dipping slightly in July. Still, this is far from the drop of 6% that was expected for this section of the market this year.
The Eastern Cape, Kwazulu-Natal and Mpumalanga have seen strong house price momentum, and now lead the provincial growth with rates currently above 5% per annum.
A recent report by FNB showed it recorded house price growth of 2.8% in the year to August, up from 1.8% in July.
It found that the average time a home stays on the market before it is sold has shrunk to only 10 weeks and six days – from 13 weeks and four days in the first quarter of the year. The long-term average is 13 weeks and three days.
FNB said that there has been an unexpectedly rapid recovery in market activity, with signs of “buyer exuberance” thanks to the lowest interest rates in 50 years, lower prices in some (mainly affluent) suburbs and lower transfer duties.
These factors have lured renters and first-time buyers into purchasing property, says FNB. Data from the Deeds Office shows that younger buyers (below 35 years) now account for 43% of residential sales, from 38% in 2019.
“Our initial expectations were for the pandemic to have a more chilling and lingering impact on [home-buying] activity, with demand picking up only later this year and extending into next year. In contrast, the FNB mortgage applications data, combined with data from mortgage originators, shows volume of new mortgage applications have surpassed pre-lockdown levels, reaching new highs in the last three months,” FNB said in a statement.
The busiest segment is for homes between R750,000 and R1.6 million, with 72% of estate agents in this market, who were surveyed by FNB, satisfied with the current conditions. The higher end of the market – above R3.5 million – is struggling more, with only half of estate agents satisfied.
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