Research conducted by FNB shows how the average house price in South Africa has climbed over the past five years across three size categories: large, medium, and small.
Household and property sector strategist at FNB Home Loans, John Loos, noted that early-2017 has seen the continuation of a long term trend in terms of smaller sized home price inflation out-pacing that of medium and larger sized homes.
However, the medium-sized category of homes no longer outperforms the large-size category in terms of price growth, FNB said.
FNB’s size categories are as follows:
- Small-sized homes – 20-80 square metres
- Medium-sized homes – 80-230 square metres
- Large-sized homes – 230-800 square metres
In the first quarter of 2017, the house price inflation rates for two of the three categories, i.e. those of the small and medium-sized categories, slowed, Loos said.
The small-sized segment price inflation was the highest of the three segments, at 6.1% year-on-year in the first quarter of 2017. However, growth slowed from 6.6% in the previous quarter, and 9.6% in the first quarter of 2016.
The Medium-sized segment’s rate slowed to 2.9% year-on-year in the first quarter of 2017, from 3.8% in the previous quarter. At the same time, the large-sized home category saw a mild house price growth acceleration from 3.2% year-on-year in the previous quarter to 4.1% in the first quarter of 2017.
“The current economic environment remains weak, though not in recession, causing weak household income growth, and interest rates have risen mildly in recent years. Effective personal tax rates continue to rise, while municipal rates and tariff increases outpace general inflation,” said Loos.
“And, of course, there is the “sliding scale” for transfer duties, putting more expensive homes, which are on average larger, into higher transfer duty brackets. In addition, security concerns often drive demand for smaller homes in “secure” clusters,” he said.
The small-sized FNB House Price Index has inflated by 395% since the first quarter of 2001. The medium-sized Index is not too far behind with 374.2% cumulative inflation over the same period.
But the large-sized Segment has underperformed by a significant margin, especially since around 2011, cumulatively inflating by a significantly lesser 281.3% since early-2001, FNB said.
“At some point, such underperformance in price growth leads to these homes becoming relatively attractive to a growing group of people as many medium-sized home values catch up with the larger-sized home values,” Loos said.
“We do, however, remain of the view that smaller-sized homes are the future for many households, and that this size category will for a far greater portion of overall housing stock in years to come,” he said.
Average house price in South Africa by size category
|Price by size||2013||2014||2015||2016||Q1/2017|