Cape property market slowing fast warning
Price decline gathering speed faster than expected in Cape, but Joburg, Tshwane cook.
Residential property owners in the Western Cape have been warned to brace themselves: the declining trend in price inflation is gathering speed in that province at a faster rate than earlier figures suggested.
The markets in Johannesburg and Tshwane metros, meanwhile, are still cooking, with both showing minor accelerations in house price inflation in recent months.
The latest Lightstone Risk Management property indices which are based on deeds office data, among other sources show the Western Cape province is a major drag on national average house price inflation.
In March, it was just under 11% year-on-year down from more than 12% in February in that province.
In previous releases of the indices, it appeared that this provinces declining trend in price inflation was beginning to flatten out. However, the March revisions suggest that the decline is gathering speed again, said John Loos, strategist for FNB Commercial and author of the latest Lightstone report.
The news will come as no surprise to some estate agents in the province, who told Moneyweb in July that they have seen the property market in the region slowing for some months.
Still not showing in the figures, however, is the full implementation of the National Credit Act (NCA) from June.
Agents around the country were reporting a significant slow-down in the granting of home loans that month, as banks and originators battled to get to grips with the new procedures and paperwork required to process applications.
Loos noted in his report, released on Wednesday, that the Western Cape is the most expensive province, but off its high base now has the lowest price inflation of the nine provinces.
Gauteng, meanwhile, is showing the most resilience to factors, like rising interest rates, that are expected to put the brakes on the residential market.
The countrys economic engine, Gauteng shows the slowest pace of decline in house price inflation. Year-on-year, property owners would have seen prices rise by more than 17%.
Johannesburg recorded 18,3% year-on-year price inflation and Tshwane
around 18,7%, both up by a fraction of a percentage on figures for the
The Free State is the only province showing acceleration in price inflation, though that is off a low base.
In March, its year-on-year price inflation measured 27,7% - second-strongest behind Limpopo (32,7%), though the latters price inflation is slowing. KwaZulu-Natal showed year-on-year inflation of 16,4%.
Loos said the holiday property component may have partly explained the weaker performance of the coastal provinces and metros compared to the inland regions on the whole.
Holiday accommodation is non-essential, so potential buyers tend to hold back while interest rates are rising, noted Loos.
Coastal property is expected to come back strongly in 2008, said the property strategist.
He said he does not believe the NCA will change any trends. It could merely provide short-term reinforcement for the trend, he said.
Article by: Jackie Cameron - www.moneyweb.co.za