Advice and Opinion

Small home price growth

The latest ABSA home loan statistical analysis of South African residential prices appears to fulfill a prediction made by Mike van Alphen, National Manager of the Rawson Property Group’s bond origination division, Rawson Finance, early this year. In January van Alphen went on record as saying that unless the pattern already observed changed drastically, there was every likelihood that the growth rate in small homes (defined as being between 80 m2 and 140 m2) would be double that of medium size (140 m2 to 220m2) and large homes (221 m2 to 400 m2). Van Alphen also predicted that, although still sluggish, demand for the top range homes would start improving this year.

The latest records from ABSA show that in the first six months of this year small home sales prices saw an 11,3% growth, giving an average sale price of R730,000. By way of contrast, medium house prices grew at only 8,6% to an average price of R1,077,100, and large homes grew by 9,7%, to give an average price of R1,679,100.

“This,” said van Alphen, “shows that in real terms only small homes kept well ahead of the inflation rate. Even more significant, however, is the fact that year-on-year growth, it is now predicted by almost all analysts, will stay in the single digit bracket for the remainder of this year, if not longer.”

The rental patterns on South African homes, added van Alphen, show a similar trend, demand for low value homes being far higher than for those of more expensive properties.

In both rentals and sales, said van Alphen, the Rawson Property Group’s figures appear to bear out those quoted.

“Franchises with a strong presence in the lower and lower middle brackets,” said van Alphen, “are proving to be the fastest growers. However, as many investors have discovered, there is a surprising number of high demand ‘pockets’ throughout the country where buyer interest remains extremely strong and buyers are having to outbid each other to get properties. These ‘pockets’ can have homes valued as high as R3 million to R5 million.”

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