03 May 2012
South African house price growth accelerated in April from 8.1 percent in March to 8.6 percent in April year-on-year (y/y), according to FNB.
The bank says this is the highest y/y growth since June 2010.
Writing in the April FNB House Price Index, John Loos, FNB property strategist says given the current world economic conditions with evidence pointing to global economic growth slowing, it appears too early to expect a sustained move to higher house price growth in South Africa.
Loos explains that in real terms as at March, the index showed a mild increase to +2 percent y/y with consumer price inflation in that month having come in at 6 percent.
This still means that since the real house price peak reached in February 2008, real house prices (house prices adjusted for CPI inflation over the period) were -12.6 percent lower at March 2012, although in nominal terms they were +13.3 percent higher than February 2008.
Compared to price levels at the inception of the FNB House Price Index in July 2000, real prices were 70.3 percent higher as at March 2012, while nominal price +231.7 percent higher as at April 2012.
Loos says this improvement in the residential market is thanks to banks’ willingness to provide home loans.
“We also believe recent improvement in real economic growth has helped support employment and household disposable income growth.”
Loos points out that from a February peak of 1.42 percent month-on-month, the FNB House Price seasonally-adjusted growth rate has slowed for two consecutive months to 1.17 percent in April.
The recent month-on-month growth surge in the FNB House Price Index, which has taken place over the summer months starting in November 2011, was the third mini-surge in house prices since the 2008/9 recession dip.
Meanwhile, the Rawson Property Group chairman Bill Rawson says current low interest rates are beneficial to property buyers on long-term credit.
Buy-to-let investors are urged to grow their portfolios especially since many people are battling to access finance to buy their own homes.
Pam Golding Properties (PGP) reports that Vredekloof and Kleinbron in Cape Town’s northern suburbs are popular choices for buyers ranging from students and young professionals to families and business people.
First-time buyers also find the suburb appealing, says PGP’s area manager for the northern suburbs, Maureen Nel.
She says a two bedroom apartment in the suburbs can cost as little as R540 000 to around R650 000 while mid-level family homes cost between R1 million and R1.5 million.
Larger and more luxurious properties are priced between R2 million and R4 million.
She notes that buyers are especially looking for freehold and sectional title properties in the price category from R900 000 to R1.5 million.
Over 60 percent of buyers are aged below 50 with more buyers comprising parents looking for secure accommodation for their children attending Stellenbosch University.
“The student market also helps drive the demand for rentals, which are in strong demand across all price ranges, from apartments at around R4 200 per month to luxury homes leasing for over R20 000 per month.”
The strength of this rental market also makes Vredekloof and Kleinbron very attractive options for the buy-to-let investor.
As an example Nel says in Klein Bron Estate, a plot bought in 2003 for R220 000 was sold in 2005 for R640 000.
The new owner then built a 450 square metre house on the property, which is now on the market at R3.6 million.
Another plot bought for R175 000 in 2002 was re-sold four years later for R950 000.
Derek Evans of Rawson Properties Muizenberg franchise says the Muizenberg residential market is active as seen in the number of sales concluded since the beginning of the year.
Evans says homes for sale take two months in the market before they are sold thanks to the area’s affordability and convenience location.
Buyers are mostly beach lovers, surfers and/or mountain walkers.
Property prices vary with one home at Costa da Gama sold for R415 000 to a buy-to-let investor expecting rental of R3 500 per month.
Evans says there is strong demand for homes priced between R600 000 and R900 000 with only 55 percent of potential buyers in the middle bracket qualifying for the bonds they apply for.
Ongoing transformation has made Muizenberg highly desirable and sought after, with prices rising steadily.
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