Cape Town - The Western Cape housing market is flourishing, with its double-digit house price growth, while others have been languishing in single digits.
According to the latest Property Barometer report regarding the June FNB House Price Index, the Western Cape has been highlighted as the major region that has really “bucked the trend” in terms of average house price growth.
For the entire second quarter of 2016, the national average house price inflation rate was 7.1% year-on-year (y/y), up from 6.4% in the first quarter.
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By comparison, the Western Cape Province saw a far higher 12.1% y/y house price inflation, up further from 11.4% in the first quarter, and representing the fifth consecutive quarter of acceleration.
"The province’s hard-earned reputation as well-run, and a place with the combination of significant economic opportunity plus good lifestyle, has boosted confidence towards it amongst certain property investors, while also attracting a strong net inward migration of repeat home buyers in recent years," explained John Loos, household and property sector strategist at FNB.
"The strong net inward migration of repeat home buyers to that province doesn’t only directly impact the housing market due to this group’s demand for housing. This group of people also brings purchasing power and skills to the Western Cape region, which may be transforming the province’s economy into the one with the fastest longer term growth."
Loos noted that this could be a further boost for its already-pricey housing market.
Based on the first quarter house price inflation rate of 11.4% for the Western Cape, and its CPI inflation rate of 6% for that quarter, the province’s real house price growth in the first quarter was very strong at 5.02%.
Of the major provinces, Gauteng’s house price growth also showed a very slight second quarter acceleration, but off a very low base, from 3.9% y/y in the first quarter of 2016 to 4.1% in the second quarter.
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The other two major provinces, namely KwaZulu-Natal and Eastern Cape, both showed slower house price growth in the second quarter compared to the first quarter, to the tune of 4% and 5.3% respectively.
FNB's "smaller five provinces" showed the slowest growth of 1.8% y/y in the second quarter of 2016.
"Examining the average value of home transactions included in the FNB House Price Indices, we see the Western Cape topping the averages at R1.386m in the second quarter, followed by Gauteng with R1.053m and KZN with R1.019m," said Loos.
"Examining the FNB House Price Indices for the six major metros, it becomes apparent that the City of Cape Town, with its combination of economic strength and significant land scarcity, is a key area of strength within the Western Cape, showing average house price growth of 15.7% in the second quarter of 2016."
Meanwhile, the FNB House Price Index for June 2016 rose by 7.4% year-on-year.
"This is slightly faster than the revised 7.2% rate recorded for May, extending the recent mild accelerating trend in average house price inflation to 5 months."
In real terms, when adjusting for Consumer Price Index (CPI) inflation, the rate of house price growth remains mildly positive, having recorded
1.0% in May, the result of a combination of 7.2% average house price inflation and 6.1% CPI inflation (June CPI data not yet available).
"Positive real house price inflation continues to suggest a market still very well balanced between supply and demand. However, it must be said that in times of weak economic growth and rising interest rates there exists the risk that the market can move away from a declining equilibrium price."
The average price of homes transacted in June was R1 079 613.