08 Aug 2012
House price growth rate in South Africa is anticipated to be between 5 and 6 percent year-on-year (y/y) by end of 2012, according to an FNB report.
The FNB House Price Index report for July reveals that y/y house price growth slowed mildly in July to 8.3 percent from 8.4 percent in June.
FNB says the start of a slowing y/y growth rate has been anticipated in recent months, due to the fact that the month-on-month seasonally-adjusted growth rate has been broadly losing steam since a January peak.
In real terms, as at June the index showed a slight y/y growth increase to 2.7 percent from 2.6 percent in May, helped on by a further decline in consumer price inflation from 5.7 percent in May to 5.5 percent in June.
Writing in the report, FNB Home Loans property strategist John Loos explains that since the “boom-period” real house price peak reached in February 2008 were -12.4 percent lower in June 2012, while in nominal terms they were +14.7 percent higher than February 2008 in July 2012.
Loos notes that compared to price levels at the inception of the FNB House Price Index in July 2000, real prices were still 70.6 percent higher in June 2012, while nominal price levels were +235.8% higher in July 2012.
He says the start of a loss of price growth momentum is believed to be the result of a slowing economic growth rate in South Africa.
After 3.2 percent quarter-on-quarter annualised gross domestic product (GDP) growth in the final quarter of 2011, the first quarter growth rate slowed to 2.7 percent and certain high frequency economic indicators suggest a good possibility that the second quarter may have been an even slower growth quarter, he says.
From a peak of 1.72 percent month-on-month house price growth in January 2012, the rate has slowed to 0.62 percent as in July (0.56 percent in June).
Loos points out that the July interest rate cut will be a minor stimulus to the residential property market, however, the bank does not think it will totally offset the negative impact of a slowing domestic economic growth rate and with it a slowing wage bill growth rate.
FNB anticipates a slower house price growth rate towards year end even though recent y/y growth rates have been above 8 percent.
Meanwhile, while the report warns of slowing house price growth for this year, estate agents say some parts of the country are seeing good sales activity at very good prices.
PGP’s area manager for Paarl, Surina du Toit says historic properties have a particular niche appeal to buyers and those who love the beauty and tradition of such homes - it can be a very rewarding purchase – not to mention a lucrative one, if you are prepared to invest in upgrading the property.
PGP recently sold a refurbished historic home dating back to the early 1900’s in the popular suburb of Courtrai.
Purchased in 2003 for R2.16 million, the property was extensively renovated by its new owners, transforming it into a substantial modern family home with five bedrooms, a gourmet kitchen and separate guest cottage, as well as extensive indoor and outdoor entertainment spaces with excellent flow between them.
It was sold in June this year for R8.25 million.
The agency says it has also seen a significant increase in residential property sales along Cape Town’s Western Seaboard, incorporating the coastal areas from Milnerton up to Melkbosstrand and suburbs such as Tableview, Blouberg, Parklands and Sunningdale.
For the calendar year to date, the agency has almost doubled its sales y/y and seen steady growth in demand from a number of different buyer categories, particularly for homes priced under R3.5 million.
PGP’s area manager for the Western Seaboard, Ivan Swart, says between January and June this year (2012) PGP agents sold 52 properties valued at R81 million.
Swart says the average price of the units sold has also increased from R1.433 million in the first half of 2011, to R1.55 million in the same period this year.
“This is very encouraging for an area that was previously experiencing considerable pressure from prevailing economic conditions.”
He says the Western Seaboard remains an excellent starting-point for first-time buyers, with a number of affordable options for those seeking starter homes, particularly in suburbs like Parklands, Big Bay and Sunningdale.
The greater Blouberg area has seen a large amount of activity around R1.25 million and below.
Buyers are actively snapping homes priced between R1.5 million and R1.75 million in Parklands and Sunningdale.
Swart points out that other buyers on the Western Seaboard included upcountry residents who are either relocating to the Cape, or buying for retirement, holiday or investment purposes.
Rawson Properties say with its breathtaking view of Table Mountain and its close proximity to both city and countryside, it was only a matter of time before the Plattekloof residential market staged a comeback.
This comeback is now in full swing with the upmarket suburbs of Plattekloof I, II and III, as well as, nearby security estates like Baronetcy, Little Rock and Kleinmeer showing a remarkable improvement in residential sales when compared to a lacklustre 2011.
Samantha and Filippo Ingoglia, owners of the local Rawson franchise say although there is still room for improvement, sales are already more than double compared to 2011.
The agents say most agencies in the area are selling between one and two homes per month in the more upmarket sectors.
This is particularly promising as these homes are at the top end of the market with prices In Plattekloof I, II e buying either a second or third home as they look to continually upgrade their lifestyle.”
Suburbs including Panorama, Montevista and Welgelege although slightly less affluent still offer attractive prices, of between R1.35 million to R4 million.
They say it still possible to buy a double storey three bedroom home for R1.995 million in Panorama or a three bedroom home for R1.595 million in Welgelegen currently on the market.
Karen van Vuuren, Rawson Properties’ Melkbos franchise administrative manager, says the area has witnessed a 10 percent to 15 percent upswing in sales this year compared to the same period last year.
It has also seen a concomitant increase in property prices which she estimates are now increasing annually at 8 percent to 9 percent.
Van Vuuren says almost five percent of the 3,350 houses in Melbosstrand, Van Riebeeckstrand, Duynefontein and Atlantic Beach Golf Estate have changed hands in the last year and the upward trend is likely to continue.
She cites reasons including the fact that the village remains popular as a fishing dorp offering a rural atmosphere.
The fact that the three residential areas - Melkbosstrand, Van Riebeeckstrand and Duynefontein are bounded on both the northern and southern sides by nature reserves and cannot therefore be expanded appeals to buyers.
She says the potential of the new dedicated fast lane Rapid Transport Bus system to cut down travel times is not only attractive to buyers but will add considerably to the value of houses in all three villages.
Van Vuuren says prices in Melkbosstrand are still ‘reasonable’, on average 25 to 30 percent less than people pay for similar homes in the Cape Peninsula.
Throughout the Melkbos area, buyers can find apartments priced from R520k and the average price of flats is around R800k.
Freestanding homes on their sales list are mostly priced from R1.1 million (for a two bedroom townhouse) to R6. 9 million for a three or four bedroom beachfront home, although a small number of the beachfront properties are “truly luxurious” and can be priced well above R10 million.
The average price of a home throughout the precinct is still significantly below R2.5 million, she says.
Van Vuuren says a one good valued property currently on the market is a four bedroom home in Duynefontein.
Ultra-modern with extensive glazed façades, generous proportioned rooms, it features an enclosed garden and an automatic irrigation system selling for R1.995 million.
Lanice Steward, managing director of Anne Porter Knight Frank (APKF) reports that in Hout Bay during May, there was a recorded amount of R79 457 000 in residential property sales as opposed to R43 345 000 in April and R41 570 000 confirmed sales in June 2012.
APKF’s Hout Bay branch had almost 20 percent of the market share in this area for that month.
“The Hout Bay market is a microcosm of what is generally happening elsewhere in Cape Town.”
Steward says the increase in sales can perhaps be attributed to the banks’ easing off of their lending criteria and also the natural cycle of the property market, which, according to historic trends does keep in line and it should start to begin to lift in 2013.
While there has been a sustained demand from local buyers for homes in the Noordhoek area, Seeff Properties agent, Dale Gremels says there has been a spike in expat and Johannesburg buyers since early last year.
She says over forty percent of the 27 properties she sold were bought by expats and buyers from Johannesburg relocating to the city.Situated in a scenic fynbos valley and fronted by the 8km stretch of pristine Long Beach, the suburb is a nature and equestrian paradise and especially family and child friendly.
Gremels says sales to expats include a beachfront home that was bought by a London-based expat for R9 million - the highest price in the area since 2007.
An expat based in Mumbai, India bought an equestrian plot with a small cottage on it for R3.2 million with the intention of developing the estate and buildings and another expat who recently returned from Mumbai bought a beautiful family home with a swimming pool in Brookwood for R3.45 million.
Sales to Johannesburg buyers have also been a mix of family homes and equestrian properties.
These range from an equestrian estate with a small cottage in Old Cape Farm Road that sold for R2.6 million to a family home in San Michelle bought for R3.75 million.
Property options range from homes on plots of around 1 000 square metres to equestrian estates and large 4 000 square metre plus sized plots.
Prices range from around R2.5 million to R6.7 million for a large, five-bedroom family home with a swimming pool, sea and mountain views in Belvedere, she adds. Denise Mhlanga
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