Cape Town’s property market continues to “defy gravity”

Cooling house prices

Cape Town’s property market continues to “defy gravity” showing a quarterly year-on-year house price growth rate of 8.4%, well above the country’s other major metro areas.

The latest findings of the FNB House Price Indices for Major Provincial and Metro Regions show that while overall, price growth in Western Cape has slowed for the third consecutive quarter registering 4.3% year-on-year compared to the second quarter’s revised rate of 5.2%, it is now significantly slower than the 11.1% revised multi-year high recorded in the first quarter of 2016.

When looking at the quarterly year-on-year house price growth rates for SA’s 6 major metros, Cape Town continued to show strength while eThekwini “remained in the doldrums in the 3rd quarter with a lowly -0.3% slight negative growth rate”, says Loos.

Western Cape price growth cooling off

Loos says slowing house price growth in the province was expected as the rate of growth has caused "mounting affordability challenges", but the metro has still seen good growth this quarter off a multi-year high of 11.3% in the 1st quarter of 2016.

On the other hand, many non-metro towns dependent on agriculture have suffered severe drought, while fires have caused massive damage in Southern Cape areas. This may constrain the pricing power of home sellers as buyers become more cautious, says Loos.

Loos points out that in tougher economic times, holiday-home buying may also decline, giving the metro an advantage over coastal towns.

“It is important to note that we are not yet talking about average house price decline in the Western Cape Non-Metro regions but about price growth ‘flattening out’ after a strong run in recent years,” says Loos.

Gauteng house prices may be due for a ‘slight lift’

The Gauteng price index was still slow, showing a year-on-year price rise of 1.3% in the 3rd quarter of 2017 compared to the last quarter's 1.2%.

Gauteng’s three metros have the lowest average time for homes on the market, according to recent FNB Estate Agent Surveys and are arguably the most “price realistic”, or closest to market equilibrium, of the major metro housing markets, says Loos.

“It is conceivable, therefore, that while we anticipate slowing house price growth in the Western Cape in the near term, after that province’s strong run, Gauteng house price growth may just start to improve slightly,” he says.

SA house price growth to remain in single digits

The FNB index shows that cumulatively, over the past 5 years, from the 3rd quarter of 2012 to the 3rd quarter of 2017, the Western Cape’s house price growth has far outpaced the other major regions, rising by 50.4%, with KZN recording 29.9%, Eastern Cape 26.8%, Gauteng 22.6% and the 5 Smaller Provinces 20.3%.

No “fireworks” are anticipated in any major provincial region in the near term, says Loos, with national house price growth forecast to be in lower single digits and none of the major regions expected to deviate too far from the national average.