13 Sep 2012
Real house price deflation will continue over the short to medium term on the back of expected trends in nominal price growth and headline CPI.
This is according to the Absa House Price Index report that reveals a marginal positive year-on-year (y/y) growth recorded in the average value of homes in the middle segment of the housing market in August 2012.
Absa note that trends in month-on-month growth point to a continued subdued price performance in the near term.
According to the report, home values in the middle segment of the housing market were up by a marginal 0.2 percent (y/y) in August after declining by a revised 0.5 percent y/y in July.
Writing in the report, Absa Home Loans property analyst Jacques du Toit says annual house price growth has been in negative territory since the beginning of the year, largely affected by continued price deflation in the small category of the middle segment of the market.
“In real terms, house price deflation continued up to July 2012, but the momentum is slowing down on the back of nominal price trends and the headline consumer price inflation rate, which tapered off to 4.9 percent y/y in July from a recent high of 6.3 percent y/y in January this year,” says Du Toit.
The average nominal value of small homes in August was R688 400 (measuring between 80 and 141 square metres), medium homes (measuring between 141 to 220 square metres) R1 021 500 and large homes (measuring between 221 to 400 square metres) R1 491 600.
Du Toit points out that South Africa’s economic growth, as measured by trends in the country’s real gross domestic product, improved to a seasonally adjusted annual rate of 3.2 percent in the second quarter of 2012 from 2.7 percent in the first quarter.
The forecast is for the economy to grow by a real 2.6 percent in 2012, with depressed global economic conditions to contribute to the expected lower growth figure compared with 2011 when the economy expanded by a real 3.1 percent.
Although headline consumer price inflation, currently at 4.9 percent y/y, is within the inflation target range of 3 to 6 percent, there are specific risks to the short-term outlook for inflation including an increase in international food prices and sharp domestic fuel price hikes.
On interest rates, he says Absa’s current forecast is for stable to somewhat lower interest rates in the next 12 months.
In view of the latest trends in house prices and the current state of and expectations regarding the economy and the household sector, house price growth is forecast to remain subdued towards the end of the year and into 2013, he says.
Seeff Jeffreys Bay report that buyers looking for holiday or permanent homes in the coastal resort town can expect property discounts of up to 30 percent on purchases.
Seeff’s licensee for the area, Gerrie Nieuwenhuis says this is because many who had invested at the height of the market boom are looking to consolidate and offload homes currently.
Jeffreys Bay is located south of Port Elizabeth and about eight hours’ drive from Cape Town, the town ranks amongst the top 10 surfing destinations in the world and hosts one of the top international surfing championships, the Billabong Pro every winter.
It is one of the most popular holiday destinations and draws more than 120 000 holiday makers during the summer with a thriving commercial and retail hub and its permanent resident population is growing as retirees and those looking for a laid-back coastal lifestyle relocate here.
Nieuwenhuis explains that the town experienced a property boom pre-2007 with price hikes, but demand has since dipped significantly, especially for homes priced over R3 million.
At the height of the market, sales volumes were trading at over 500 transactions annually; this has since come down to about 330 annually.
While demand remains strong for properties priced below R3 million, the real bargains to be had are priced above this mark he says.
One such bargain home is a five bedroom house situated at Paradise Beach and priced for R7 million including VAT and the seller is open to negotiations.
Meanwhile, a four bedroom and three bathrooms home in Noordhoek has seen a price slash of R500 000 and is now selling for R4.95 million.
It is located against Owls Koppie in the prime Dassenberg area, the six-year old home comprises 466 square metres (which includes two garages) and occupies grounds measuring 4 278 square metres.
The classic Cape Homestead has some of the best sea views, a pool and is currently the best buy in this price category, according to Greeff Properties.
The agency says prices for properties in Noordhoek range from around R2 million for a basic three bedroom spec home in Lake Michelle security estate to R28 million for a six bedroom mansion on five acres in the prestigious De Goede Hoop Private Estate.
Noordhoek offers spacious erfs and unparalleled valley and ocean views, which translate into unbeatable value when compared to similar homes with views in the City Bowl or on the Atlantic Seaboard, says Mike Greeff, chief executive officer of Greeff Properties, an exclusive Affiliate of Christie’s international Real Estate.
Noordhoek, which is about a 30 minutes drive (depending on traffic) from central Cape Town, was originally a collection of dairy farms.
Its glorious beach soon began to attract holiday makers and its bucolic surrounds drew those seeking an escape from the bustle and closer quarters of typical suburbia.
Noordhoek soon became known for its artistic and “holistic” community.
Today it is home to a growing collection of families and retirement villages, in addition to an equestrian community served by a number of riding schools and stables.
Riders are spoiled for choice with trails in protected nature reserves and along the idyllic stretch of Long Beach, he says.
Clifton remains the country’s top ranked suburb by value and any location in the suburb is a good location, but sea views and beach access is particularly sought after, he says.
Cohen explains that apartments below R5 million are not only fast sellers, but they continue to grow in value.
For example, a 39 square metre apartment in First Beach recently sold for R2 million (R51.282 per square metre).
He says it was bought by the seller a year ago for R1.43 million and sold at a phenomenal capital growth of 39 percent in just under a year.
The first opportunity comprises of two adjacent apartments in Hamilton Court that offer 58 square metres and 53 square metres priced at R3 million and R2.4 million respectively.
In First Beach Terraces, a renovated, modern studio apartment with a balcony and sea views is selling for R1.495 million.
The high demand for holiday rentals in Clifton makes the area an exceptional investment buy and demand continues to consistently outstrip supply over the tourist seasons, says the agency.
Studio apartments could fetch daily rental rates of between R1 500 and R2 000 over the busy season and between R10 000 and R12 000 per month on long-term rentals. – Denise Mhlanga
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