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Property market picks up after election, but not enough

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Activity in the residential property market has picked up
after the elections, although not enough to counteract the decline in the
months before.

This is according to the latest FNB Property Barometer
released on Tuesday.

The FNB House Price Index for June ticked in at 3.5%
year-on-year (y/y), compared to 3.3% reported in May. This takes the average half-year nominal house
price growth to 3.4%; marginally lower than the 3.5% y/y recorded in the same
period in 2018.

However, in real terms (taking inflation into account) house
prices continued to decline. FNB regards this as a continuation of a downward
adjustment of house prices in line with lackluster economic activity and lower
disposable income levels. 

In the low-income market segment, the average house purchase
price was R395 900 in the first quarter of 2019. In the lower-middle segment it
was R638 200, in the middle segment R935 000, in the upper-income segment R1.3m
and in the luxury segment R2.3m.

FNB expects some activity to recover in the second half of
the year due to the combination of expected lower interest rates and some
improvement in buyer sentiment.

The index also provides details on trends in specific
cities.

City of Johannesburg

Data for the first quarter of the year shows the average
house price growth softened further to 2.1% y/y, from 2.9% in the fourth quarter
of 2018.

This is the 13th consecutive quarter of decelerating house
price growth in the city and higher-priced areas are more severely affected,
according to the report.

House prices have even begun to fall in the Sandton area –
the most expensive region in the city – registering a 1.7% y/y decline in the
first quarter.

Soweto remains the best-performing sub-region in
Johannesburg, although the average house-price growth has slowed noticeably
over the past 12 months from a peak of 14.3% y/y in the first quarter of 2018 compared
to 4.7% in 1Q19.

City of Tshwane

The City of Tshwane’s estimated average house price softened
further to 1.5% y/y in 1Q19, down from 1.9% reported in 4Q18.

The overall house price growth in the city is impacted by
the fall in more affluent regions, with prices in Pretoria East and Centurion down
by 0.01% and 0.8% y/y respectively in 1Q19.

In contrast, the northern sub-regions of the city  primarily
comprised of middle and low-income areas – are trending upwards to 6.9% y/y in
1Q19, compared to 5.5% y/y in 4Q18.

City of Cape Town

Most sub-regions in the city are experiencing slowing house
price growth, with the most expensive regions even experiencing house price
deflation.

According to the report, there is scope for further downward
adjustment in Cape Town house prices and a nominal decline in prices is conceivable
at this point.

City of eThekwini

The City of eThekwini is performing better than all the
major metros in SA, with the average house price growth of 5% in 1Q19.

Areas in the northern parts of the city, closer to the
airport, are doing particularly well.

Excluding low-income areas – the North Coast inland region
which includes areas such as Tongaat and Redcliffe  has registered the highest
cumulative 5-year growth in the metro, at 41% versus the metro average of 31%.

Growth in the sub-region has been supported by new
developments in the area, according to the report.



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