THE slowdown in property price increases has extended to the upper end of the property market, which has previously been somewhat immune to the problems facing the lower and middle price range.
FNB’s third-quarter house price index shows that expensive suburbs, including Cape Town’s City Bowl and those close to Table Mountain, have seen a slowdown in price growth due to affordability.
Experts said across the board, from young first-time property buyers to middle and wealthy homeowners, affordability is forcing them to look elsewhere. Home affordability is becoming serious in many parts of the country, with industry experts calculating that things will only be better when the economy turns and high indebtedness comes under control.
“As home affordability deteriorates, we have seen noticeable slowing in house price growth in the higher-priced subregions, while simultaneously witnessing some price growth accelerations in more affordable suburban regions,” John Loos, FNB property analyst, said. Loos said the Cape Town sub-regional house price indices still showed pockets of good price growth in the most expensive areas.
Six of the 12 defined sub-regions saw their year-on-year growth having slowed in the third quarter of the year and three of these were the most expensive sub-regions, the index showed. “Certain of the major ‘affordable’ regions have shown recent house price growth accelerations, perhaps highlighting the city’s residential affordability challenges after a strong price inflation run in recent years,” Loos said.
“Further, our estate agent survey continues to point to first-time buyers in Cape Town battling to buy homes.” The situation was far worse in Cape Town than in other cities, he said. The City Bowl has gone from its multiyear, year-on-year growth high of 22.9% in the second quarter of last year to 15.1% by the third quarter of this year, Loos said.
He said compared with Durban, Pretoria and Johannesburg, it was conceivable that the region’s economic growth had come under pressure, not only from a stagnant broader national economy, but possibly due to the severe drought in the Western Cape. “The reality is that, the weaker economic growth may be starting to take its toll on household sector income and purchasing power growth,” he said.
Francois Viruly, a leading property economist, said the poor performance of the economy is hurting all property segments and forcing people to rent rather than own.