Repeated statements from the Rawson Property Group’s senior spokespeople affirming that there are still good reasons for having faith in the stability and appreciation potential of South Africa’s residential property market, particularly homes in the middle and lower brackets, have, it seems, been confirmed by the latest Absa house price indices which reflect the position of the second quarter of 2014. This was said last week by Mike van Alphen, National Manager of the Rawson Property Group’s bond origination division, Rawson Finance.
The Absa figures recently released, said van Alphen, show that year-on-year the value of the small homes (80 m2 to 140 m2) rose 4,9%, while medium sized homes (141 m2 to 220 m2) rose 6,4%.
Both these rises, said van Alphen, are “hardly spectacular”, but in today’s low growth South African economy have to be seen as satisfactory.
“If allowance is made for inflation, small homes actually declined in value by 0,9%, while medium sized home prices grew by only 0,6% above inflation – which, according to Absa, was running at around 6% in March and is likely to exceed 6% for much of 2014, with interest rates probably responding to this by increases, which, in my view, could total 1,5% by the end of this year.
“The simple fact is that, although there are more exciting asset classes than residential property, in South Africa’s current economic conditions lower and middle bracket housing values are holding up well and the small real growth drop in the value of small homes is insignificant enough to enable us to say that all such homes are still proving a hedge against inflation. This is something home owners can be grateful for,” says van Alphen.
The Absa indices also show a year to date growth of 7,6% in the value of large homes (221 m2 to 400 m2). This apparently bullish figure, said van Alphen, is encouraging but must be seen in context: as the Absa figures reveal, it comes off a low base, the average value of large homes having declined by 30% between early 2010 and early 2012.
“Nevertheless, now might well be the time to buy into the upper bracket, but I have to add that most agents operating in such areas as Kloof, Constantia and Bryanston are not as yet reflecting price improvements of any great magnitude. The market, they say, will continue to recover, but there will be a slow steady improvement and it will probably be another 12 months before big home prices regain their 2001 level, which in itself, we have to remind ourselves, was 15% below the peak of 2005.”
