Report Shows Good News for SA Property

Surprisingly Good News for SA Property

The Bizcommunity website has published an article detailing evidence released by a recent report that reveals South Africa’s property market is in good shape and that while growth may be slowing in certain cities, actual property prices are not dropping.

Knowledge Factory, a leading marketing insights company, released their “Report on South African Metropolitan Areas: Property Price Growth”, which bases its data derived from the company’s popular South African Property Transfer Guide (SAPTG). Essentially, the data presents an ‘overview of both historical trends and predicted property price growth rates for South Africa’s major cities’.

Veronica Kotze, regional sales consultant in the Western Cape for the SAPTG authored the report and says it “might surprise some property professionals because it confirms that property prices have not dropped recently, but are just growing at slower rates in some areas than has been previously experienced”. She adds that, “It’s really a ‘good news all round’ report. Overall, the whole country is in good shape and has been experiencing strong growth everywhere”.

All of the SAPTG information is based on figures garnered from the latest Deeds Office data, in conjunction with other proprietary datasets obtained by Knowledge Factory and this report is no different. The major cities covered include Bloemfontein, Cape Town, Durban, East London, Johannesburg, Port Elizabeth and Pretoria. The properties examined included all free standing and sectional title homes larger than 40m², but excluded those properties categorized as smallholdings or farms.

“We also used median purchased prices, as opposed to averages, to make the data as accurate as possible,” Kotze explains, “because we’re obviously dealing with very large areas and extremely diverse property types”. As well as indicating median prices for the past three years, together with the year-on-year growth rate achieved, the report also makes predictions about expected growth for 2009 and 2010. “Although it should be noted that these forecasts do not take economic factors, such as the impact of interest rates, into consideration,” says Kotze.

Johannesburg recorded a price growth rate of 21% between 2006 and 2007, but this has dropped dramatically between 2007 and 2008 to -17%. This is something that Kotze believes is a normal indication of the end of a city’s property boom and should be “no cause for alarm”.

According to Kotze, “Johannesburg has, to a large extent, led the national property boom of recent years and so it is natural that it should also be the first city showing a slight downward trend because of demand dropping off. There has been a slight drop in prices, as the result of a combination of complex factors, but generally, it still continues to grow, just not as rapidly”. She is also confident that if the report were extended for another five years, it would balance out.

Pretoria has been experiencing a similar type of growth as Johannesburg, but not quite so acutely. The city enjoyed a 14% price growth rate between 2006 and 2007, but this has tapered off to 4% between 2007 and 2008. “Pretoria has always fluctuated less and been more stable than Johannesburg,” says Kotze. “[T]he median price of property is higher than in Johannesburg. This suggests that the city doesn’t have as much middle to low cost housing and therefore, has older, more stable residential areas”.

The property price growth rate in Cape Town is also slowing down and this indicates that the property boom is also tapering off there. The growth rate of 22% recorded between 2006 and 2007 dropped to 6% between 2007 and 2008, but the city continues to offer the highest median values for property found across the country.

In stark contrast to the three major metropolitan areas in South Africa, regional cities like Bloemfontein, East London and Port Elizabeth are currently experiencing their own property booms and enjoying healthy property price growth rates of 40%, 30% and 14% respectively. “This is good news,” says Kotze, “and a reflection of both big economic injections, like the building of the 2010 stadiums and strong property development”. However, she does expert these growth rates to taper off in the coming years.

While the report shows that some metropolitan areas are experiencing significant growth and prices are coming down in others, Kotze stresses that this is really just a reflection of where each city is in the property cycle and current levels of demand for property, rather than the actual value of the property within it.

“This report is only a very high-level snapshot of a complex set of underlying conditions,” adds Kotze, “but it still clearly shows that property prices have not dropped. They are just growing at a slower rate than they have in recent years. Some properties have indeed been sold ‘at a lower price’, probably due to recent rate increases, but this is not a trend yet. Further hikes and other economic pressures may very well change that. It may well take longer to sell a property in the three big cities right now, particularly in relation to expectations that were set three or four years ago, but the value of property is still growing”.

The information in this article is courtesy of Knowledge Factory (“Report reveals good news for South African property market”, Bizcommunity, 2 June 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.