HOUSE price inflation, which stood at 4.57 percent as at the end of November 2021, is a broad national average, and buyers and sellers would do well to consult a property professional to get a more accurate estimate of their own suburbs and circumstances.
This was according to RE/MAX of Southern Africa regional director and chief executive Adrian Goslett, who said this week that the housing market was not immune to the effects of inflation.
Often referred to as house price appreciation rather than inflation, the rising cost of real estate affects both buyers and sellers as well as landlords and tenants.
The monthly growth in the house price inflation rate as at the end of November 2021 was 0.29 percent. Data from Lightstone Property said the national year-on-year house price inflation was “at 4.6 percent, marking a third consecutive month under the 5 percent growth mark”.
Prices in the low value segment continued to outgrow those in the higher value segments. The inflation rate for the lower priced house segment was at 9.6 percent, almost double that of the mid-value segment (5.1 percent), said Goslett.
He said these national averages were different from hyper-localised information.
For instance, the same Lightstone report said the inflation rate for Gauteng was 4.7 percent at the end of November, and 7.7 percent in the Eastern Cape. The Western Cape was at 7.1 percent and KwaZulu-Natal at 5.5 percent.
“Understandably, variations within each suburb can be expected to make up the provincial average.
“For buyers, these averages provide an indication of how much more a property will cost if they buy in a year’s time from now. For landlords and tenants, these averages can provide an indication of what a fair annual rental escalation could be.”
He said a key consideration to judge house price appreciation figures against was national consumer inflation, which was at 5.5 percent by the end of November.
“To ensure a good return on investment, those looking to purchase should find areas where house price appreciation has a good history of beating consumer inflation. Similarly, sellers might want to delay putting the home on the market if house price appreciation has been below consumer inflation for some time. Markets tend to swing back, so sellers have a good chance of enjoying better returns if they wait for the market to become more favourable,” he said.
Chas Everitt International chief executive Berry Everitt said most inflation in South Africa was not coming from a rapidly growing economy and rising employment, but was being ‘imported’ from rising oil prices and rand weakness, so it was not really within the country’s control.
Everitt said average differences between asking price and selling price were steadily shrinking, but rising interest rates and rising prices were likely to decrease buyer affordability and make it more difficult to qualify for home loans over 2022.
“Since 2020, the demand for generally lower-priced sectional title units has also been driven by a huge number of first-time buyers taking advantage of low interest rates to become home-owners rather than tenants,” said Everitt.
BUSINESS REPORT ONLINE