In the first quarter of 2014, the FNB Western Cape House Price Index recorded year-on-year (y/y) growth of 11 percent from 8.8 percent in the previous quarter.
According to the report, greater land scarcity in and around Cape Town keeps the Western Cape’s average residential property values the highest in the country, even though the Western Cape’s per capita income is only the second highest of the provinces, behind that of Gauteng. The report notes that the Western Cape CPI inflation accelerated to a 5.8 percent from 5.3 percent with the average price of homes transacted (those financed by FNB) in the Western Cape reaching R1 133 068 in Q1 2014.
Report writers, FNB Home Loans household and property sector strategist John Loos and property market analyst Theo Swanepoel, explain that in real terms the FNB Western Cape House Price Index remains well-above levels of a decade ago, up 26.1 percent from the first quarter of 2004., however, compared with last decade’s real average price peak, reached in Q1 2007, the first quarter of 2014 real price was still -16.8 percent lower.
In nominal terms, Q1 2014 average price was 106.8 percent higher than the first quarter 2004 price level but only 36.8 percent above the first quarter of 2007 level.
While house price has shown impressive growth in the first quarter of 2014, buying activity remains firmly focused on primary residential property and buy-to-let buying as a percentage of total home buying was 10 percent in Q1 2014.
Loos and Swanepoel note that although off a low of 4 percent back in mid-2012, the level remains low by boom era standards of last decade, where buy-to-let was sometimes estimated at above 20 percent of total buying.
The Western Cape is estimated to be the second most affordable province to buy property in after Gauteng, read the article here.
Residential affordability may be a key factor in increasing or decreasing the attractiveness of a region for skilled labour, and thus one of a region’s competitive advantages or disadvantages.
This province also has the second fastest long-term growth economy behind Gauteng.
According to the report, greater land scarcity in and around Cape Town keeps the Western Cape’s average residential property values the highest in the country, even though the Western Cape’s per capita income is only the second highest of the provinces, behind that of Gauteng.
New World Wealth revealed in a report that the Cape Town tops the list of seven cities in which to buy property in Africa with property prices sitting at US$6 500 per square metre in 2013 - click here to read the article.
On affordability, Loos and Swanepoel note that the Western Cape’s strong economic performance, resulting in the second highest per capita income of the provinces, is the key contributing factor in keeping the province’s property market relatively affordable to its residents despite high prices.
They say that this has meant that, when using FNB’s provincial average house price estimates, the Western Cape’s Average House Price/Per Household Income Ratio of 4.85 as at 2012 compared well with the 4.21 of Gauteng.
The Western Cape’s affordability is enhanced slightly by a larger average size of household than Gauteng (possibly in part the result of higher property values in the Western Cape limiting young people’s ability to establish new households as early as they may wish) implying that, while Gauteng has a higher per capita income, the Western Cape has a higher per household income, they explain.
“While the Western Cape is not quite as affordable as Gauteng, it is not far off Gauteng’s levels, and is substantially more affordable than the lower income provinces of KwaZulu-Natal, with its ratio of 6.29, and the Eastern Cape with 6.66, which have significantly less affordable residential markets despite having lower average house prices.”
FNB points out that while house price growth rates are still solid, we may see some tapering in this growth later in 2014. - Denise Mhlanga Courtesy of http://www.property24.com/articles/western-cape-property-price-growth/19934
