Property & Wealth

South African housing market cooling down countrywide

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The boom times of recent years in the South African housing market seem to be over for now.

This is the picture that emerges from the latest FNB Provincial House Price Indices released last week.

All five FNB Major Regions’ House Price Indices showed slowing year-on-year growth in the third quarter of 2016.

Even the Western Cape Region Index, although remaining by far the strongest performer, may be ‘past its best’, showing for the third quarter, a slightly slower price inflation compared with the multi-year high of the previous quarter.

From the report of John Loos, household and property sector strategist at FNB, released last week, it emerges that across all regions there is a slowing in the housing market. This comes amid mounting financial constraints in the household sector – driven in recent years by house price inflation exceeding per capita income growth, rising interest rates, and growing concern among consumers about their economic and financial future.

Still at the top of the pile is the Western Cape, with year-on-year house price inflation of 10.5%. At the bottom of the pile is the Eastern Cape Province with a growth rate of only 0.1%.


The report shows that there is a direct link between the strength of the market and affordability in terms of the link between house prices and the average per capita and per household incomes.

“Despite the Western Cape and Gauteng being, on average, the two most expensive provinces price-wise, they are not the least affordable. They also have by far the highest per capita and per household incomes.

“The Western Cape had the highest per household income of the major regions, to the tune of R245,788 in 2015, as estimated by HIS Globalinsight.

Gauteng was not far behind with R229,192, with KZN a significantly lower third at R173,103.

“On a per capita income basis, Gauteng had the highest, estimated at R72,951 in 2015, followed closely by Western Cape with R70,628, and KZN third with R42,702, far lower than the top two.

“So the Western Cape and Gauteng are well ahead of the rest when it comes to either per capita income or per household income estimates,” the report states.

Going for the Western Cape

The affordability factor, stemming from the combination of house prices and income levels, are however not the only one that props up the market.

In his report Loos writes: “Through 2015 and early-2016, the Western Cape housing market bucked the broader national trend, strengthening for much of the period while the rest of the country trended weaker.

“We believe this was due to the province reaping the benefits of the strongly positive perceptions that it had built up for being the province with a combination of good lifestyle, well run, and with very good economic opportunity. (Our emphasis.)

“In recent years, we have seen the Western Cape having a strong ‘net inward migration’ of repeat home buyers, something the other eight provinces don’t have, and this may have provided some additional support to the region’s housing market.”

From this assessment, it is clear that the quality of governance in a region has a direct impact on the wellbeing of the market.

by Steve Whiteman

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