The latest (8th August) report from Absa’s Home Loans Division has confirmed that price growth in the lower middle and middle price categories (which account for some 65% of all residential sales in South Africa today) has remained ‘satisfactory’, says Bill Rawson, Chairman of the Rawson Property Group.
“Absa’s analysts have indicated that year-on-year values have risen by 6,5% and by 8,5% in the first seven months of this year. Regrettably, however, they do not see the 8,5% figure being maintained for much longer.”
Absa’s figures, added Rawson, are more or less in line with those of the Rawson Property Group. Both show that the average price of a small home (80 m2 to 140 m2) is now ± R826,000, for medium size homes (141,00 m2 to 220 m2) R1,470,000 and for large homes (221 m2 to 400 m2) R1,816,000.
Looking ahead, said Rawson, while it can be assumed that strong demand will continue to push up and sustain prices, home purchasing in the year ahead is likely to be made more difficult by the economic factors currently prevailing in South Africa. Absa has indicated that prime lending and mortgage rates will rise to 9,5% by the end of 2014 and to 10,5% by the end of 2015. This will begin to mark the end of the lower interest rate era.
Other factors likely to affect the property market, said Rawson, are high unemployment and household debt (currently close to 75% of the GDP), increasing caution among the banks in regard to their lending policy and the current high levels of consumer price inflation, with a 6,6% growth rate at present.
“Taking all these factors into consideration,” said Rawson, “residential property looks set to remain a safe but unspectacular investment, one in which year-on-year growth will match or remain slightly ahead of the inflation rate. For the man-in-the-street in the current market conditions, this makes it a very wise investment channel.”
