House-price growth in Gauteng continues to soften, with Soweto the best-performing sub-region in Joburg
Subdued economic activity and lower disposable income levels have added to a continued downward trajectory of house prices that has been significant in Gauteng for the past four years – good news for buyers, but not so much for sellers.
The luxury market in particular has been hard hit and buyers could pick up a bargain in that bracket. The estimated average discount on asking price is at 14% in 2Q19, versus the 10% national average.
“This implies buyers have a disproportionately high negotiating power in those segments,” says FNB analyst Siphamandla Mkhwanazi. Adding to the perception of a buyers market are statistics from FNB’s latest House Price Index that show mortgage advances grew faster in May, recording 4.2%y/y up from 4.0% y/y in the previous month.
“This is the highest increase since July 2016. If maintained, it could help support purchasing activity,” says Mkhwanazi. Across price segments, lower-value bands (namely the bottom 40% of the price distribution) are faring relatively better than their higher-value counterparts (the top 40% of the price spectrum).
The low-income band (average purchase price R395900 and corresponding to the bottom 20%) grew by an average 16.3% y/y, while the lower-middle segment (average purchase price R638200) averaged 6.8% in 1Q19.
The middle segment, which corresponds to homes in the middle 20% of the price spectrum (average purchase price R935000) registered 4.2%. On the higher end, upper-income (average purchase price R1.3million) and luxury value (average purchase price R2.3m and corresponding to the top 20%) bands registered 3.0% and 0.8% y/y respectively in 1Q19.
“These are largely reflective of supply-demand imbalances across price segments – excess demand in the lower end and excess supply in the higher end.
“The Estate Agents survey estimated that virtually all properties in ‘high-net-worth’ areas (properties exceeding the value of R3.6m) transacted at less than the initial asking price in the first half of 2019.”
How the metros fared
City of Johannesburg
FNB’s 1Q19 data showed the city’s estimated average house price growth softened to 2.1% y/y, from 2.9% in 4Q18 – the 13th consecutive quarter of decelerating house price growth in the city.
Generally, slowing prices are prevalent across virtually all sub-regions, with the higher-priced areas most affected.
Sandton: house prices have started falling here (the most expensive region in the city), registering -1.7% y/y in 1Q19.
Randburg and Midrand recorded 0.4% and 2.0% y/y in 1Q19 from 1.7% and 2.4% y/y respectively in 4Q18. Mid-price range properties are also seeing slowing growth.
Joburg South and Lenasia slowed to 1.4% and 3.7% y/y in 1Q19, from 2.5% y/y and 4.9% y/y respectively in 4Q18.
Soweto remains the best performing sub-region in Joburg, although average house-price growth has slowed noticeably over the past 12 months. It has come down from a peak of 14.3% y/y in 1Q18 to 4.7% y/y in 1Q19.
City of Tshwane
As in Joburg, Tshwane’s estimated average house price softened further, and registered a subdued 1.5% y/y in 1Q19, down from 1.9% in 4Q18. Sub-regional indices show house-price growth in the city is being dragged by the more affluent regions.
Pretoria East and Centurion prices fell by 0.01% and 0.8% y/y respectively in 1Q19. In contrast, the northern subregions, primarily comprised of middle and low-income areas, are trending upwards.
Acasia, which primarily offers middle-priced housing alternatives, jumped to 6.9% y/y in 1Q19, from 5.5% y/y in 4Q18. This marks the third consecutive quarter of accelerating prices in the region.
Moving further down the price range, the Mabopane/ Soshanguve sub-regions remain buoyant, and accelerated to 10.6% y/y in 1Q19 from 10.1% y/y in 4Q18.