House price growth in the Southern Cape had also exceeded that for holiday towns nationally.
John Loos, a household and property sector strategist at FNB, said the Southern Cape had underperformed the overall Western Cape house price index since the end of 2012.
Loos said house prices in the region had increased by a cumulative 42.9percent since the fourth quarter of 2012, whereas the Western Cape market as a whole had grown 74.6percent in the same period. This was in contrast to the pre-2008 housing market bubble, when the Southern Cape outperformed the Western Cape.
Loos said the market had been more “rational” since 2008, while the household sector had become more financially constrained. This implied that primary residential demand had been the main focus of the household sector and holiday home demand had been on the backburner he said.
“We believe this has been the key reason why the strongly holiday home-driven markets of the Southern Cape have underperformed regions closer to the City of Cape Town metro,” he said.
Loos said the FNB City of Cape Town house price index had increased cumulatively by 78.8percent in the past five years, while nearby towns had also seen high price growth in this period.
FNB’s national house price index grew by 36.6percent from the end of 2012 to the end of last year, and the FNB national holiday towns house price index increased by 28.9percent.
Loos believed house price growth in the Southern Cape outperformed the national average and holiday towns nationally because it was part of the most sought-after region for so-called “semi-grants”.
He said Cape Town and its nearby towns had seen significantly stronger house price inflation than the Southern Cape, which meant that home affordability nearer to and within Cape Town had deteriorated more significantly than most regions in South Africa, including the Southern Cape.
Loos said this would result in a growing portion of “aspirant semi-grants” searching for more affordable residential regions, which could make the Southern Cape a more desirable destination in the near future.
House prices in the George-Outshoorn area grew the fastest in the Southern Cape last year, at 17.1percent, followed by Mossel Bay at 12.7percent.
Loos said the Bitou Municipality, which included Plettenberg Bay, recorded house price growth of 9.77 percent last year.
- BUSINESS REPORT