JOHANNESBURG - Mounting home affordability challenges in the City of Cape Town have started to take a toll on the most expensive sub-regions in and near to the City Bowl, where house price growth continues to slow.
John Loos, a household and property sector analyst at FNB, said the overall Cape Town housing market remained “very strong” with average price growth at 11.4 percent year-on-year despite some mild slowing in growth over the past five quarters.
Loos said the higher priced sub-regions led the cycle in a relatively strong property period but as affordability became a mounting challenge, the search for relative affordability could turn a portion of housing demand in the direction of more affordable sub-regions.
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“This can cause the more affordable regions to lag the cycle, with their house price growth accelerating at a slightly later stage,” he said. Loos believed this had possibly begun to happen in Cape Town’s “affordable” regions, including the Cape Flats and the Elsies River-Blue Downs-Macassar regions.
He said the average house price growth of the Atlantic Seaboard, the recently “hot” and most expensive sub-region in the City of Cape Town Metro, had slowed from a multi-year high of 26.5 percent in the first quarter of this year to 19.9 percent in the third quarter.
He said the price growth slowdown started a little earlier in the City Bowl, with its multi-year year-on-year growth high of 22.9 percent in the second quarter of last year declining to 15.1 percent in the third quarter of this year.
Loos said the near eastern suburbs sub-region, which included Salt River, Woodstock and Pinelands and with an average estimated transaction price of R1.848 million, was the most affordable sub-region within close proximity to the City Bowl.
While the average house price growth of this sub-region had also slowed, this slowdown had been minimal and far less than the other three regions in and near to the City Bowl.
Loos said the average house price growth of all three major northern suburbs sub-regions had also recently started to resume some acceleration.
From a 13.6 percent year-on-year house price growth rate in the final quarter of last year, the price growth rate of the “Western Seaboard” sub-region, including Blouberg,
Milnerton and Melkbosstrand, accelerated to 17.2 percent by the third quarter of this year.
In addition, the price growth of the Bellville, Parrow and surrounding areas sub-region had accelerated from 9.7 percent year-on-year in the fourth quarter of last year to 12.1 percent in the third quarter of this year.
More recently the price growth rate of the Durbanville-Kraaifontein-Brackenfell sub-region had increased from 8.8 percent in the second quarter of this year to 9.1 percent in the third quarter.
Loos said these markets within close proximity to the City Bowl have been sought after in recent years as the broader city commuter population increasingly battled traffic congestion to and from the City Bowl and also highly sought after by foreign buyers, investors and a significant number of affluent up-country migrants moving to the Western Cape.
However, Loos said the price growth acceleration in certain more affordable sub-regions had been insufficient to halt an overall house price growth slowdown in the City of Cape Town as a whole.
Loos said that apart from affordability challenges, it was also conceivable the region’s economic growth had come under pressure recently from not only a stagnant broader national economy but possibly also the severe drought conditions in the Western Cape.
Weaker economic growth may also be starting to take its toll on household sector income and purchasing power growth, he said.