Analytics company Lightstone has released a new report focusing on South African property in 2018.
The data was based on the combined findings from major institutions, as well as analysis from their own data sets.
At the end of 2017 national house price inflation stabilised at roughly 4%, said Paul-Roux de Kock, analytics director at Lightstone, adding that experts do not expect noteworthy deviations in 2018.
“This range is also indicative of what can be expected for house prices in 2018. In layman’s terms, if the economy does not fluctuate, neither will the house prices,” he said.
“Because of the dynamic nature of inflation, it is warranted that a variation in the South African house price inflation forecasts for the mid, high and luxury values bands is expected.”
The same fluctuation can be expected for freehold properties, de Kock said.
“Looking back at the last 18 months we have observed that price inflation of the mid-value properties has tended to be about 2% above national inflation,” de Kock said.
“High value properties are 0.5% below national inflation and luxury properties sit at about 2% below national inflation.”
De Kock said that the negative link between house prices and house price inflation will persist until the end of 2018 with the following forecasts:
- Mid value between 4.6% and 7.5%
- High Value between 2.6 and 5%
- Luxury 0.8% and 3%
Lightstone noted that higher growth in the lower market segments have not always been the norm, with the luxury segment experiencing disproportionately higher growth from 2009 to 2016.
“One potential reason for the recent decline in the luxury segment inflation is due to owners scaling down, and this, combined with more buyers from the informal housing market entering the lower end affordable market, would drive the increase in the lower and mid value segments,” it said.
Sectional title vs free-hold
Lighstone said that differences in the house price inflation of sectional scheme and freehold properties are less pronounced, with the difference between the two segments conventionally being around 1% up or downward.
Similar to the luxury segment, freehold properties have traditionally grown faster than sectional schemes.
However De Kock explained that there was now a reversal of this trend.
“In recent months this has changed and sectional scheme properties has experienced some growth and this is probably due to this segment’s affordability and added benefits like security and maintenance.”
De Kock said that the trend will persist into 2018 and that freehold and sectional scheme property prices won’t deviate too far. Sectional scheme property prices will continue to grow faster than freehold properties.
The house price growth for these two segments are expected to grow at:
- Sectional scheme properties between 3.4% and 5.9%
- Freehold properties between 2% and 4.5%