JOHANNESBURG - House price growth in the luxury and upper-income areas slowed further in the second quarter, but accelerated in the three middle- to lower-end house price segments, with average prices under R1million, according to FNB.
The low-income area house price segment, which includes houses with an average price of R362579, was the strongest performer in terms of year-on-year house price growth of the five house value segments.
The growth in the luxury area value band, comprising houses with an average price of R2.35m, slowed to 4.4percent year-on-year in the second quarter from 4.7percent in the previous quarter.
John Loos, a household and property sector strategist at FNB, said the rate of growth of the luxury area value band had slowed the most significantly of all five value bands since about 2014, to reach the slowest rate of growth of all the segments by the second quarter of this year.
Loos said the luxury area value band had the highest growth base a few years ago, but was now the weakest segment.
Growth in the upper-income area value band, which includes houses with an average price of R1.27m, slowed to 4.9percent year-on-year in the second quarter from 5.3percent in the previous quarter.
Loos said the data for the second quarter appeared to suggest the luxury and upper-income area value bands were still “depressed” relative to the three lower segments, whose average price was below R1m.
He said in these weak economic times, with real gross domestic product growth of a mere 0.75percent in the first quarter of this year, they would expect a financially constrained household sector to continue to search for relative affordability in greater numbers, which played into the lower end of the market.
“Not only is the stagnant economy constraining real disposable income growth, but an ongoing variety of tax rate increases lift the cost of living too. Municipal rates and utilities tariffs continue to increase at above consumer price index (CPI) inflation, raising home operating costs and making especially the more expensive homes significantly more costly to own and run.
“The recent series of fuel levy increases impact more heavily on the private transport-dependent higher income groups. Indeed, of late, it is the higher income/expenditure groups whose CPI inflation rates are the highest,” he said.
The low-income area house price segment recorded year-on-year house price growth of 16.9percent in the second quarter, compared to 15.8percent in the previous quarter.
However, Loos warned about major potential distortions in this category, because it included the social housing component, with new homes often registered at the deeds office at a value that did not reflect any market value.
There had also been periodic sell-offs of rental stock by councils over the years that had not necessarily taken place at property market values, he said.
The lower middle income area segment, which includes houses with an average price of R590309, had the strongest rate of growth behind the low income area value band at 8.1percent year-on-year in the second quarter, compared to 8.1percent in the first quarter and 6.3percent at end 2016.
The rate of growth in the middle-income band increased to 5.5percent year-on-year in the second quarter from 5.3percent in the previous quarter.