On reading through John Loos’ latest FNB Property Barometer House Price Index report dated 7 January 2014, it is interesting to compare what house prices are doing nationally year on year (and then further to what they are doing in the Western Cape, which is the area that Knight Frank Residential SA predominantly work in at present), says Lanice Steward, managing director of the company.
According to the FNB report, the national house price figure rose by 6,8% in 2013, slightly lower than the increase of 7,1% of the previous year. The average price of homes sold in 2013 was R891 976 in 2013 and in 2012 was R835 480.
Property continues to be a good investment, however, because if one looks at the real price average for 2013 compared to that of 2003, there is an increase of 42,6% in the decade. This is usually the minimum time frame a person should aim for when buying property as an investment, as it is only over the long term that a quantifiable growth is made on the investment, said Steward.
Comparing these figures to a sample from PropStats (the Institute of Estate Agents property data service), which relies on data inputted from agents in this region, the average sales figure for homes in the Western Cape is currently R2 346 878. The average listed price is R2 602 672, which means that homes are selling at just under 10% below the listed price, and they sold in an average period of 98 days.
Looking at the year before’s figures, 2011 to 2012, the average listing price of units was R2 316 938 and the average selling price R2 048 798, and properties were taking approximately 112 days to sell.
The Western Cape average house price (using the PropStats sample as a base) for 2013 was up 14,5% on the previous year, considerably higher than the national average, said Steward.
“With the banks taking steps to relax their lending criteria and grant more bonds, which can be seen in the National Credit Regulator’s data showing that the mortgage component of loans granted grew by 20% in the last quarters, there is growth in the market, particularly at the lower end,” said Steward. “For the first time in about five years, we are seeing more activity amongst developers in the Western Cape, and although the increase is a low 3,2%, at least there is growth.”
There is high demand for units and low supply at present, and according to Loos, the Demand and Supply Ratings see the gap closing between the two. The figure stood at 48.73 in December, very close to the 50 level, which is the crucial tipping point in the market, said Steward.
“The announcement of the Wescape plans by the City of Cape Town to expand the urban edge further north along the West Coast and create a mini-city between Melkbosstrand and Atlantis will benefit developers tremendously as this will alleviate the shortage of land available for housing developments.
“We will eventually see businesses moving to the new CBD and growth in the selling prices of properties in certain areas on the West Coast and the smaller towns to the north which up until now have remained fairly stagnant,” said Steward. “The plans to build 200 000 houses, 415 schools, 370 public service facilities and 15 sports complexes over the next 10 to 15 years, are very welcome as there has been a shortage of development in the Cape.”
“In 2014 Loos predicts a growth of 9% for 2014, and we expect in the greater Cape Town area the growth will be between 17 to 18%, if taking previous years’ figures and percentages into account,” said Steward. “The Western Cape’s healthy economy and these plans to expand, I think, will keep the value increases of property here higher than the rest of South Africa.”
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