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Property Barometer - April 2017
WESTERN CAPE HOUSE PRICE GROWTH TAPERS FURTHER, ALTHOUGH STILL REMAINNG THE STRONGEST OF THE MAJOR REGIONS
Examining the FNB House Price Indices for the country’s major regions, slowing price growth in the country’s recent star performing region, the Western Cape, continued in the 1st quarter of 2017. The year-on-year average house price growth for the Western Cape measured 6.2% in the 1st quarter, slower than the 7.7% rate of the previous quarter and now significantly slower than the 10.6% multi-year high recorded in the 1st quarter of last year.
However, despite slowing, the Western Cape’s average house price growth for the 1st quarter remained well above other major regions, the next fastest growth rate being a tame 1.1% year-on-year growth in the FNB Smaller 5 Provinces House Price Index (includes Mpumalanga, North West, Limpopo, Free State and Northern Cape Provinces). This was followed by KZN Provincewith 1% growth, Gauteng with 0.7%, and the Eastern Cape with a negative -1% rate.
Despite the Western Cape having done very well in recent years in terms of confidence in the region and its ability to attract middle to higher income repeat home buyers from other major regions, ultimately the strong real house price growth in much of this region should lead to a mounting affordability challenge, and we believe that this may have been happening in recent quarters.
Such an affordability challenge would be more relevant for financially limited 1st time buyers as opposed to more financially strong repeat home buyers, and the FNB Estate Agent Survey has for some time pointed to a very low rate of 1st time home buyingin the City of Cape Town Metro.
1st time home buyers in Cape Town are believed to have made up a lowly 8% of total home buyers during the 2 summer quarters of 2016/17. By comparison Joburg’s estimate was a far higher 27% and Tshwane a healthy 21%.
It is in this 1st time buying percentage that we believe we are seeing indications of a greater affordability challenge of late in the Western Cape, as opposed to the other “slower moving” major residential markets.
