Last week ABSA published its House Price
Index review, which includes the June figures. It is always useful to consider
the periodically published reports by South Africa’s two largest mortgage
lenders – ABSA with 28% market share and Standard Bank with 33% market share.
It was not long ago when ABSA actually dominated the mortgage market with a
market share of just over 30%, while Standard used to have a market share of
just over 20%. How things have changed. What I really like about ABSA’s reports
is that they divide the index into small (80-140sqm), medium (141–220sqm) and
large houses (221-400sqm). The nominal house price growth of ABSA properties
within these categories grew by 5,6%, 6,8% and 12,3% to June 2013 respectively.
Interestingly the small and medium home price growth has come under pressure
with falling growth rates and the larger house category has grown stronger but
seems to be nearing a peak. They also report on the luxury segment of the
market which they define as homes priced between R3,8m and R13,8m. The luxury market experienced 4% price
deflation in the first quarter of 2013 after price deflation of 1,9% in the
fourth quarter of 2012. This translated into real price deflation of 9,2% in
the first quarter after adjusting for the effect of inflation. This statistic
is of particular interest for our markets such as Zimbali and Simbithi, and
confirms our on-the-ground understanding that prices of many high-end homes are
down. Without exception we have seen every transaction in the higher price
brackets trade at pricing off the initial listing price. Sellers are however
taking note of this trade and their expectations are adjusting to the realities
of the market. The volumes are therefore up even though pricing on higher-end
properties may be down.
ABSA’s geographical
analysis is excellent as it divides the figures in terms of province as well as
coastal areas. The highest coastal region growth outside of KZN came from the
Cape Peninsula and False Bay with 6,5% quarter-on-quarter growth as at the
first quarter of 2013. The year-on-year figure was 14%. Other coastal regions
were not able to exceed 4% in quarterly growth. KZN is the coastal hotspot at
the moment with ABSA nominal house price growth of 15,5% on a quarterly basis
and 34,1% on an annual basis. Even more surprisingly the KZN South Coast
actually experienced price deflation of -5,7%. All the growth was therefore attributed
to the North Coast growth in nominal house prices of 17,1% on a quarterly
basis, and 47,9% on an annual year-on-year basis. This is phenomenal and
provides some insight into the level of migration of people to the North Coast,
mainly from Gauteng, which we have been talking about for a while.
(Author: Andreas Wassenaar, published in The Bugle, 17 July 2013)
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