Report reveals good news for South African property market
A recently released report reveals that the country's property market is in good shape and that, while the boom' is tapering off in certain cities, it's only growth rates, not actual property prices that are dropping.
Leading marketing insights company, Knowledge Factory, has released a report on property price growth rates for South Africa's major cities. Entitled Report on South African Metropolitan Areas: Property Price Growth', the report is based on data derived from the company's popular South African Property Transfer Guide (SAPTG). The report presents an overview of both historical trends and predicted property price growth rates for South Africa's major cities.
This report might surprise some property professionals because it confirms that property prices have not dropped recently, but are just growing at slower rates in some areas than has been previously experienced, observes Veronique Kotzé, Western Cape regional sales consultant for the SAPTG and the report's author. It's really a good news all round' report. Overall, the whole country is in good shape and has been experiencing strong growth everywhere.
Deeds data reveals prices and predictions
We also used median purchased prices, as opposed to averages, to make the data as accurate as possible, explains Kotzé, because we're obviously dealing with very large areas and extremely diverse property types.
As well as highlighting median prices for 2006, 2007 and 2008, together with the year-on-year growth rate achieved, the report also predicts expected growth for 2009 and 2010. Although it should be noted that these forecasts do not take economic factors, such as the impact of interest rates, into consideration, notes Kotzé. They are simply based on previously achieved growth and the patterns revealed by those property sales.
Johannesburg's lead no cause for alarm'
Johannesburg has, to a large extent, led the national property boom of recent years, Kotzé maintains, and so it is natural that it should also be the first city showing a slight downward trend because of demand dropping off. There has been a slight drop in prices, as the result of a combination of complex factors, but, generally, it still continues to grow, just not as rapidly. I'm also confident that if we were to extend the report on for a further five years, we would see it balance out.
Pretoria and Cape Town also slowing down
Pretoria has always fluctuated less and been more stable than Johannesburg, observes Kotzé, and perhaps the data gives us a clue as to why since it shows that the median price of property is higher than in Johannesburg. This suggests that the city doesn't have as much middle to low cost housing and, therefore, has older, more stable residential areas.
Cape Town's property price growth rate is also slowing down and suggests that the property boom is tapering off there too. The 2006 to 2007 growth rate of 22 percent dropped to 6 percent between 2007 and 2008. Nonetheless, the city continues to offer the highest median values for property across the country.
Regional cities on the up
Kotzé is also quick to point out that the report suggests that Port Elizabeth is actually at a different stage in the growth cycle to Bloemfontein and East London. In fairness to Port Elizabeth, while its property boom started after the big three, it is ahead of the other regional cities, she observes. A fact reflected in the 40 percent price growth rate it achieved between 2006 and 2007.
Growth rate reflects stage in property cycle
This report is only a very high-level snapshot of a complex set of underlying conditions, she confirms, but it still clearly shows that property prices have not dropped. They are just growing at a slower rate than they have in recent years. Some properties have indeed been sold "at a lower price", probably due to recent rate increases, but this is not a trend yet. Further hikes and other economic pressures may very well change that. It may well take longer to sell a property in the big three cities right now, particularly in relation to expectations that were set three or four years ago, but the value of that property is still growing.
For further details about the SAPTG Report on South African Metropolitan Areas: Property Price Growth' or to find out more about subscribing to SAPTG, the leading and most comprehensive web-based source of information relating to South African real estate, visit the SAPTG website at www.saptg.co.za or contact Knowledge Factory directly on (011) 445 8150.
Issued by: Knowledge Factory - www.bizcommunity.com