Slowdown in Cape property prices?

Cape Town seen the end of the price spiral of top-range residential properties? Though a growing number of industry players argue that the market is seeing a slowdown in the top end of the scale, others – among them independent property economist Erwin Rode – roundly dispute this view. What is not in contention, however, is the continuing growth in the price of mid-range properties, says Bruce Swain, CEO of RE/MAX of Southern Africa.
Swain adds that the rate of increase in prices and sales in properties that range in the R3-m and above category has slowed down during the last quarter, while properties in the R2,5-m and less framework have continued to grow.

“Figures indicated that the national average selling price of property had increased by 31% from R445 366 in 2003 to R585 493 this year,” says Swain.

Jacques du Toit, senior property economist at Absa, agrees that the property market is seeing some stabilization at the top end of the market. “From our research it is evident that prices are slowing down at the upper end of the market, particularly in the R2,2-m and above category,” says Du Toit.

But Rode is skeptical about Swains comments about stabilization at the top end of the residential property market. “Not even in Atlantic are prices leveling off.” He charges that “people should produce motivated reports – harder evidence – that supports some of these claims.”

Swain contends that prices in the upper end of the Western Cape and central parts of Durban, prices have slowed down. “Over the last four years property prices have increased enormously and now affordability issues may have cropped up, hence the slowdown,” explains Swain.

“We got the evidence from our offices that operate in these areas that in the last six months properties were snapped up in three days but now they can be in the market for a long time,” argues Swain. Also, says Swain, sellers have had unrealistic expectations on their properties and this slowdown signifies “some sanity” in the market.

He argues that the slowdown is a good thing because if prices just kept on rising, the property market could end up in a bubble.

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