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South African homes are losing their value – except the really cheap ones

Business Insider SA
(Getty)
(Getty)

  • Inflation is eating away at the value of South African homes, new data shows – in general.
  • Really cheap residential property is still beating CPI with price increases, even in May, when consumer inflation hit 6.5%.
  • House prices were still easily outpacing inflation in 2021, but growth has been slowing since, while inflation has ballooned.
  • For more stories go to www.BusinessInsider.co.za.

The real value of South African homes is falling, new data from property and automative information company Lightstone shows, across regions and value bands – except for the cheapest class of residential property.

In May, the average year-on-year rate of inflation for residential property was at 4.46%, Lightstone says.

That is significantly slower than the 6.5% for consumer price inflation (CPI) measured by Statistics South Africa in May.

See also | Inflation hit a shocking 6.5% in May – but it wasn’t quite that bad in the Western Cape

The difference between consumer inflation – or the rate at which money is losing its value – and the increase in house prices is eating away at real prices. In April, Lightstone measured property inflation at 4.6%, while inflation came in at 5.9%. And in March, property inflation was 4.7%, while CPI had been at the same rate of 5.9%.

The differences mean that a property worth R1 million has effectively lost R50,000 of its value to inflation over those three months.

Global inflation pressures, much due to Russia's invasion of Ukraine, remain unabated, and many countries are struggling with consumer inflation rates far higher than those seen in South Africa. 

But one category of property has consistently been outperforming consumer inflation in its price growth, Lightstone's data shows.

In the "low value" segment – for property selling at less than R250,000 – May's rate of inflation came in at 7.2%. That is slightly slower than the 7.6% in April, which was in turn slower than the 8.2% recorded in March. 

That implies a house worth R200,000 at the beginning of March has effectively gained a little under R11,000 in real value since then.

Overall residential property inflation was at 5.8% in the first quarter of 2021 and hit 6% by the second quarter, Lightstone data shows, before slipping back to 5.8% in the third quarter and then to 5.3% in the fourth.

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