FNB has released its latest house price index, focusing on the cost of property across South Africa’s five main wealth bands.
The index groups areas according to their average home transaction values, using deeds data, and include all cities and towns in South Africa.
According to FNB, the average house prices across these indices are as follows:
|Luxury area||R2.35 million|
|Upper income area||R1.27 million|
|Middle income area||R895 168|
|Lower-middle income area||R590 309|
|Low income area||R362 579|
The second quarter data updates appear to suggest that the luxury and upper income area value bands are still ‘depressed’ relative to the 3 lower segments whose average price is below R1 million, said FNB.
“In these weak economic times, with real GDP (gross domestic product) growth of a mere 0.75% in the first quarter of 2018, we would expect a financially constrained household sector to continue to search for relative affordability in greater numbers, which plays into the hands of the lower end of the market.”
“Not only is the stagnant economy constraining real disposable income growth, but an ongoing variety of tax rate increases lift the cost of living too.
“These include ongoing personal tax increases, which are structured to impact more heavily on higher income groups, and a 2018 VAT increase. Municipal rates and utilities tariffs continue to increase at above CPI inflation, raising home operating costs and making especially the larger and more expensive homes significantly more costly to own and run.
“And then there is the recent series of fuel levy increases, which impact more heavily on the private transport dependent higher income groups. Indeed, of late it is the higher income/expenditure groups whose CPI inflation rates are the highest.”
As a result, FNB said that a broad shift in a portion of demand towards more affordable areas, and smaller and more affordable homes whose running costs are lower, should thus be expected in these times of multi-year economic stagnation along with a rising cost of living.