Rebound in Gauteng house prices

After stabilising at +3.01% in Q4 2023, national house price inflation in South Africa has inched higher in Q1 2024, rising to +3.1% in March 2024, with anticipated lower interest rates later this year and stronger economic growth likely to boost both market activity and house price growth in late-2024, according to the latest Pam Golding Properties Residential Property Index.

Says Dr Andrew Golding, chief executive of the Pam Golding Property group: “Notably, with Western Cape house price inflation slowing markedly – at +2.9% in March 2024, growth in Gauteng prices continues to strengthen – currently at +2.5%, indicating that house price inflation in the two regions is rapidly converging.

“Also of interest, according to a recent data revision by Lightstone, house price growth is resurgent in the Northern Cape, rising to +4.2% in December 2023 (latest available data).

“Meanwhile, national house price inflation (HPI) in the lower price band, below R1 million, continued to accelerate in March 2024, rising to +7.9%.

“Furthermore, the rebound in coastal house prices continued in December 2023 (latest available data), rising to +6.7%, while non-coastal HPI slowed, resulting in the coastal vs non-coastal price premium widening further, to +5%, a level last seen in mid-2005.”

Surge in demand for investment properties 

Positively, says Dr Golding, the surge in demand for investment or buy-to-rent properties continued in March 2024, lifting the Q1 2024 average to 12.5% of applications, compared to just 8.3% in Q1 2023. Notably, applications for buy-to-rent/investment properties are being led by the Western Cape.

Says Dr Golding: “The banks remain supportive, with improved pricing, higher loan-to-value ratios (averaging at 91.4% in Q1 2024) and still elevated approval rates – with the national concession relative to prime easing to -0.55% in March 2024. The Q1 2024 average of -0.52% compares favourably to -0.45% a year ago and highlights the banks’ positive stance.

“However, with household finances impacted by elevated interest rates, rising fuel prices and a sluggish economy, the demand from first-time buyers has dampened – except in Gauteng South and East and the Free State, where the continued relative affordability of homes ensures ongoing demand from this sector of the market.”

According to ooba Home Loans, the overall price paid by first-time home buyers rose to R1.17 million in Q1 2024, +4.8% higher than Q4 2023 and +3.1% above year-earlier levels. Ooba’s records reveal that the overall price paid by home buyers averaged R1.48 million in Q1 2024, also reflecting an increase of +3.1% from year-earlier levels.

Notwithstanding this, points out Dr Golding, rather than reflecting a recovery in demand in the market, the Q1 2024 increase in the average price paid is largely attributable to more affluent buyers purchasing properties in high-demand areas, such as the Western Cape.

Gauteng reclaims top spot as SA’s dominant residential building region 

Despite the influx of semigrants to the Western Cape and the growing demand for Western Cape properties among property investors, Gauteng has regained its top spot as the largest market for planned residential building activity, as developers continue to identify demand for homes in Gauteng.

Says Dr Golding: “One of the key trends in recent years has been the outperformance of the Western Cape property market – with residential building plans passed in the region surpassing the number of plans passed in Gauteng for the first time in 2022. However, while the Western Cape registered a further small increase in its share of plans passed last year, Gauteng recorded a surprise rebound in planned residential building activity and regained its traditional spot as SA’s dominant region in this regard, albeit by a slender margin.”

Source: StatisticsSA

Dr Golding says the three largest provinces – Gauteng, the Western Cape and KwaZulu-Natal – account for almost 80% of all residential property sales in the country. “There have been two waves of semigration – predominantly from Gauteng to the Western Cape between 2016 and 2018 and then again after the pandemic, which is visible in the shift in the share of property sales during these periods. Nonetheless, Gauteng maintained its majority share, accounting for nearly 40% of all sales in 2023 – unchanged from 2010. In contrast, the Western Cape has seen an increase in its share while KwaZulu-Natal has seen a small decline.”

Source: Lightstone

Semigration slowed during the course of 2023 after reaching a record high of 14% of all sales during the second half of 2022 – the highest percentage on record. However, it has rebounded once more in Q1 2024 – up from 10.9% in Q4 2023. Semigration averaged 13.2% in 2022 and 11.8% in 2023. (Source: FNB Estate Agent Survey).

According to Lightstone, the total value of South Africa’s residential property stock currently totals almost R6.88 trillion, says Sandra Gordon, research analyst for Pam Golding Properties. “Properties in estates are generally more expensive and, as a result, estate homes account for 6.6% of all homes but 18.1% of the total value. In contrast, freehold homes are by far the largest residential property sector, accounting for 80.5% of all homes but just 66.3% of all value – in part attributable to the fact that new, affordable homes are typically freehold. This is also illustrated by the fact that the average value of a freehold home is R807 463 compared to R1.18 million for the average sectional title home and R2.7 million for an estate home .

South Africa housing stock (February 2024) 

Source: Lightstone

Says Gordon: “In 2010, properties valued at less than R500 000 accounted for 58% of all sales in South Africa, according to Lightstone. By 2023, this had declined to less than a third – at 31%, no doubt due to lower income earners being under financial pressure plus the fact that building costs have risen significantly over the past decade. In contrast, sales in the R500 000 to R1 million price band have remained steady in the period since 2010 at around 25%-26% of total sales.

“The R1 million to R3 million price band accounted for 35% of all market sales in 2023, a significant increase from just 15% in 2010, while sales in the top two bands (R3 million – R5 million) and R5 million and upwards, have increased too,” adds Gordon.

Source: Lightstone March 2024

For further information visit www.pamgolding.co.za

Posted by The Know - Pam Golding Properties