Johannesburg - House prices in the Western Cape are increasing at a faster rate than the four major South African provinces despite average house prices in the province also being the most expensive in the country.
FNB’s Western Cape house price index released yesterday revealed that house prices increased year on year by 7.7 percent in the second quarter, followed by the Eastern Cape (6.8 percent), KwaZulu-Natal (5.9 percent) and Gauteng (4.6 percent).
John Loos, a household and property sector strategist at FNB Home Loans, said this above average price inflation occurred despite the estimated average house price of Western Cape homes being R1 230 487 in the second quarter, which was significantly higher than the average price of R1 011 214 in Gauteng.
The average estimated value of homes transacted in the City of Cape Town Metro increased by 7.8 percent in the second quarter to R1 265 766, which was also the highest house price inflation rate of the other major metros.
House prices in Tshwane increased by an average of 4.7 percent, Nelson Mandela Bay by 4.6 percent, Johannesburg by 3.5 percent, Ethekwini by 3.3 percent and Ekurhuleni by 1.6 percent.
Fastest house price growth
Loos said the fact the Western Province had the fastest house price growth in recent times might be related to the province’s growing popularity as a destination of a significant group of the country’s more affluent repeat home buyers and its status as the country’s second fastest long-term growth economy.
The FNB estate agent survey for the second quarter also revealed several market strength indicators in the Western Cape, with the activity ratings level of 6.61 on a scale of one to 10 exceeding the national average rating of 6.33.
In addition, the estimate of the average time homes remained on the market before being sold dropped to 9.1 weeks in the Western Cape in the second quarter.
This was considerably quicker than the estimated 12.1 week national average and the average time of 20 weeks in the province in the third quarter of 2013.
However, Loos said these market strength indicators were not necessarily a sign of longer term confidence levels but often just a reflection of income and interest rate levels.
Land scarcity
“That the Western Cape is the most expensive residential market has much to do with it having the second highest provincial per capita income behind Gauteng, but simultaneously having a greater land scarcity than landlocked Gauteng,” he said.
Loos added that the superior confidence levels in the province extended beyond property performance indicators and it appeared home owners in the province also had greater confidence in the province’s long term future as a place to live.
The estimated percentage of sellers selling to emigrate was estimated at 2 percent in the Western Cape in the first half of this year, which was about half of the national average percentage of almost 4 percent.
Business Report