Although there is as yet “nothing to write home about” when looking at house price trends in South Africa, there are now clear indications that residential property has regained some of its traditional appeal for investors, says Mike van Alphen, National Manager of the Rawson Property Group’s bond origination division, Rawson Finance.
Van Alphen listed four sets of figures from the latest Absa Housing Review, all of which, he said, give grounds for confidence. These are:
“It has of course to be admitted, by way of contrast, that luxury homes (those priced above R3,8 million in Absa’s Housing Review) continue to show negative growth year-on-year – but this is less than 10% of the total market,” said van Alphen.
“The improvement,” said van Alphen, “is unlikely to boost home buying by a large amount, but it is worth recording that we are at last seeing the outstanding household debt to disposable income ratio stabilizing at around the 75% mark and the on-going low interest rates still make it a great deal easier to service debt. Home buying will, therefore, remain steady in the coming year.
- The cost of building a new home, said van Alphen, has dropped drastically over the last three years and it is now rising at only 5,4%, i.e. roughly in line with the national inflation rate. A surge in new home buying in the next 12 months is, therefore, likely to be seen – and in fact is already evident in areas such as Brackenfell in the Cape.
“Those who are gloomy about housing prospects,” said van Alphen, “all too often base their opinions on what they see happening in the upper middle and upper bracket homes. One needs, however, to look at the total market to get the true picture.”
The almost intense activity in the R500,000 to R1 million bracket, added van Alphen, is clearly visible in the figures acquired from many of the Rawson Property Group’s franchisees, which his finance division services.
“It is now quite clear,” said van Alphen, “that a very large proportion of the increased turnover achieved by the Rawson Property Group year-on-year has been driven by sales in the lower middle and lower brackets and I can see no reason for thinking that this will not continue.”