According to Standard Bank’s house price index, South Africa’s house prices increased for the first time in three months in April. These were led by KwaZulu-Natal and Gauteng as consumer expenditure on big-ticket items continued to improve in line with the broader economic recovery.
Standard Bank’s house price index showed that growth improved to 5.3% year-on-year in April after stagnating at 5.1% for February and March, the first year-on-year increase since the 5.2% growth recorded in January.
The improvement in the national property market appeared to track the improvement in other large-expenditure items such as passenger vehicle sales, which increased 6.4% year-on-year in April, from 3.7% year-on-year in March.
Siphamandla Mkhwanazi, Standard Bank’s property economist commented:
“Despite the rather slow start to the year, we still see 2018 house prices stronger than in 2017 due to the turnaround in business and consumer sentiment as well as gradually easing credit conditions … Building and purchasing activity, which were relatively subdued in the past year, will likely benefit modestly from the upswing in business and consumer sentiment, which would likely have to turn out positively on a more consistent basis before the impact filters through to the housing market.”
The improvement in national house price growth comes even as mortgage advances remain muted, averaging just 3.3% year-on-year throughout the first quarter of 2018 despite improving consumer sentiment and a reprieve granted to consumers by the Reserve Bank, which lowered borrowing costs to a two-year low at the end of March. The Reserve Bank cut its benchmark lending rate by 25 basis points to 6.5% on 28 March, the lowest level since early 2016.
KwaZulu-Natal and Gauteng led the recovery in house prices in April with year-on-year growth of 7.1% and 6.3% respectively, up from 6.8% and 5.9% recorded in each of the two provinces in March. The Northern Cape and the Free State were the pack leaders among the economically smaller provinces, recording respective year-on-year house price growth of 6% and 5.1% in the first quarter. Standard Bank uses three-month averages to calculate house price growth in smaller provinces as the lower transaction volumes in these jurisdictions can cause monthly price changes to be volatile.
In contrast, house price growth in the Western Cape and Eastern Cape continues to decelerate, while Limpopo and Mpumalanga are still suffering from home price deflation. Western Cape house price growth eased to 3.2% year-on-year in April, down from an upwardly revised 4.2% in March, while those in the Eastern Cape grew just 2.1% year-on-year in April, lower than the downwardly revised 3% year-on-year recorded the previous month.
House prices in the North West showed encouraging green shoots with average prices climbing 1.4% year-on-year in the first quarter after a difficult 2016 and 2017. Home prices in Limpopo and Mpumalanga continued their deflationary trend with both provinces seeing home prices decline -1.9% and -1.1% respectively during the first three months of the year.
Interestingly, the deflationary trend was also present in the wealthy property segment (those valued at more than R2.6m), which experienced year-on-year house price declines of -6.6% in April. Growth in the affordable segment (those valued at less than R650,000) softened to 2.6% year-on-year in April, from 2.7% the previous month.
Properties in the middle-end of the price spectrum (those priced from R650,000 to R1m and R1m to R1.6m) continued their solid upward trend. These properties, which account for just over 50% of all mortgage transactions in South Africa, saw growth of 7.2% and 10.7% respectively in April. Property price growth at the upper-end of the residential housing scale (R1.6m to R2.6m) eased to 4.3% year-on-year in April, from 4.6% the previous month.
Stand-alone properties continued to outperform townhouses and flats with the price of the median free-standing home climbing 7.6% year-on-year in April, versus 6.9% year-on-year in March to R1,049,200. House price growth for flats and townhouses remained relatively flat at 5.8% year-on-year in April, with a median price of R874,700.