House Prices Declining, Find Bargains

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28 Jul 2011

House prices are set to decline in real terms in 2011 and 2012 according to the latest Housing Review third quarter report by Absa.

Located in the suburb of Farramere in Benoni, this four bedroom house is selling for R1.35 million.

The report which tracks the quarterly house trends in South Africa revealed that growth in nominal house prices remained low or was in negative territory in some segments of the market in the second quarter of 2011.

“In some instances, prices were rising steadily on a quarterly and annual basis. “ With consumer price inflation picking up during the second quarter, some real house price declines occurred on a quarterly as well as year-on-year basis in the past quarter,” said Jacques du Toit, Absa Home Loans property analyst.

He explained that taking cognisance of the state of household finances, labour market conditions, the level of consumer confidence and the prospect of rising interest rates in 2012, the year-on-year growth in mortgage finance extended to the household sector is forecast to remain in single digits up to the end of 2011 and into 2012.

The report indicated a further improvement in the affordability of housing in the first quarter of 2011 impacted by low house price growth and slightly lower interest rates and rising household disposable income in the quarter.

Du Toit said house price trends varied at a geographical level in the country’s provinces, metropolitan areas and major coastal regions.

According to the report, affordable homes have an average price of R480 000 or less and was up by a nominal one percent year-on-year to around R312 4000 in the second quarter of the year with prices declining by 3.4 percent year-on-year in real terms in the quarter.

Small houses grew at -5.6 percent nominal and -9.8 percent real terms, medium-sized houses -0.3 percent nominal and -4.7 percent real terms and large houses 1.2 percent nominal and -3.3 percent real terms.

Homes valued above R3.5 million and up to R12.8 million recorded a price growth of 2.5 percent year-on-year in the second quarter of 2011.

While some areas are experiencing further decline in house prices, estate agents report a gradual recovery in the inland housing market with sales having increased up to 20 percent from January to May 2011.

According to Pam Golding Franchise Services national sales and operations manager, Greta Daniel, property markets in towns such as Krugersdorp, Klerksdorp and Carltonville are currently experiencing a slow recovery.

Daniel said these towns dependent on the gold mining industry are seeing an improvement as the mining sector recovers. Buyers are looking for value for money and affordability, which is where many of these central or inland regions have much to offer.

This five bedroom home situated at Aquavista Mountain Estate on the Bronkhorstprut is priced at 4.85 million.

“There is an improvement in the number of homes changing hands and while initially prices remained around R1 million and below since 2010, this price band has increased to properties over R1 million,” said Daniel.

She said in 2007/2008 when platinum prices spiralled with the demand for commodities towns such as Rustenburg, Brits, Lydenburg and Burgersfort experienced unprecedented growth and demand for housing. This growth and demand is still evident in these towns.

Another positive impact on the inland housing markets has been the demand for coal. Eskom’s Medupi power station in Ellisras created a significant demand for homes for its workers.

Areas such as Witbank and Bronkhorstspruit continue to see demand for property and rental stock, she said. There are a lot of properties priced right in the East Rand suburbs such as Benoni, Boksburg and Kempton Park.

“These areas remain resilient and offer sound value for money despite having to compete with older suburbs with good infrastructure.”

Daniel further said they are seeing increased activity at the top end of the market thanks to astute property investors with cash as leverage in their negotiations. Demand for second homes is said to be making a comeback as families seek a recreational outlet.

“Buyers are looking at country homes and farms in Dullstroom, Clarens and the Vaal Dam. “A migration of retired people from large metropolitan areas to small country towns is on the increase,” said Daniel.

In Swellendam, the property market is said to have picked up since the slump two years ago with a 60 percent improvement year-on-year.

Raimond Lamprecht, principal of Jawitz Properties said there is good value in Swellendam with foreign and country buyers drawn to the town’s beauty.

Growth in properties priced between R400 000 and R750 000 has increased and  a three to four bedroom house sells for R1million while a sectional title apartment in a retirement village would fetch R850 000.

“I believe the market has begun to bottom out and there is more interest from buyers as sellers are more inclined to accept lower offers in line with the current market,” said Lamprecht. – Denise Mhlanga

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About the Author
Denise Mhlanga

Denise Mhlanga

Property journalist at

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