File image: A house in Brayston, Sandton
JOHANNESBURG - Gauteng's three metros - the cities of Tshwane, Ekurhuleni and Johannesburg - have been undergoing a gradual real house price correction and have since 2008 all experienced a more than 20% cumulative reduction in house prices when adjusted for consumer price inflation.

John Loos, a household and property sector strategist at FNB, said cumulative real house prices had declined by 22.3% in Tshwane, 24.5% in Johannesburg and 25.5% in Ekurhuleni since the first quarter of 2008.

Loos added that all three of Gauteng’s major metros continued to show low single-digit nominal house price growth in the third quarter of this year.

He said average house prices in Tshwane grew by an estimated 4.4% year-on-year in the third quarter of this year, which was marginally stronger than the 4.21% growth in Ekurhuleni and 2.31% in Johannesburg.

However, Loos said that with Gauteng consumer price index inflation at 4.8% year-on-year in the third quarter, these low nominal house price growth rates translated into real house price declines.

Real house prices declined in Tshwane in the third quarter by 0.03% year-on-year, in Ekurhuleni by 0.5% and Johannesburg by 2.3%, which was likely to lead to an improvement in housing affordability when considering house price inflation relative to income inflation, he said.

Loos added that although the Gauteng residential markets did not show any great strength at present, there appeared to be a broad pattern of low priced sub-regions performing a little better than the high-priced end.

He said there were not any recent strong “outperforming” regions in Gauteng.

Nominal growth

But Loos said the lowest income region, such as the former township region of Diepsloot-Soweto-Meadowlands-Pimville, had shown the strongest cumulative nominal growth in house prices over the past five years at 42.82%, with the Midrand-Diepsloot region a distant second with 26.33% cumulative growth.

He added that the highest price region of Sandton and surrounds had grown the slowest at 17.92%, but off the highest base.

The better growth performance of low priced sub-regions appeared to tie in with the first-time home buying trends in Gauteng that were evident in FNB’s estate agent survey.

He said estimated year-to-date first-time buying accounted for 26.62% of total home buying in greater Johannesburg and 24.3% in Tshwane, both above the national average of 20.26%. “Solid first-time buying in the province may be a key source of support for the low end of the housing market,” he said.

However, Loos said confidence in the country’s economic future could be a reason for buyer caution among the higher income groups.