Banks, mortgage originators and estate agents say that average home prices increased by between 5% and 6% per annum in 2015 – when in actual fact, they only increased by 0.94%.<\/p>\n
This is according to Neville Berkowitz, property economist and adviser to low-commission estate agency, HomeBid.<\/p>\n
Berkowitz noted that even the South African Reserve Bank is using this incorrect information in its assessment of home price inflation which it estimates at the inflation rate of 5.2% p.a. for 2015.<\/p>\n
The discrepancy lies in the limited sample of sales and transfers used by these market commentators, Berkowitz said.<\/p>\n
However, HomeBid’s analysis takes into account every single home sold and transferred in all the deeds offices around the country: 289,613 in 2015 and 290,257 in 2014.<\/p>\n
According to the group’s data, in 2014 the average price of a home transacted at the deeds offices around the country was R1,222,639<\/strong> and in 2015 it was R1,234,120<\/strong> – an increase of only 0.94% p.a.<\/p>\n “This is based on information supplied to us by the South African Property Transfer Guide (SAPTG), which we use to analyse market trends,\u201d the group said.<\/p>\n South Africa\u2019s banks each only have a maximum 9% market share of the total sales and transfers due to 65.5% of homes being bond-free, according to research by Absa and Lightstone.<\/p>\n “The banks\u2019 samples on which they base their home price increases may not therefore be fully representative of the entire residential market.”<\/p>\n To illustrate this, the HomeBid pointed to the largest number of homes transacted in 2015: the lowest-price category of less than R250,000, where some 85,155 homes, or 29.4% of all homes were transacted.<\/p>\n “These homes, on average, dropped 6.7% in price in nominal terms, and 11.9% down in real terms (after inflation), in 2015 when compared to 2014,” Homebid said.<\/p>\n “This was mainly due to the 0.5% p.a. increase in interest rates last year. The prospects for this price category in 2016 are even bleaker as interest rates are expected to rise during the year by at least 1.5% p.a.”<\/p>\n At the top end of the price category range are the R10 million-plus homes which saw the highest average price increase of only 2% p.a. This is based on the average price of the 2,642 homes sold and transferred nationwide in this price category in 2015 when compared to 2014.<\/p>\n “What concerns me most about these 5% to 6% p.a. average home price increases used by market commentators, who may be using limited samples of homes sold and transferred, is that the average homeowner believes he currently has an inflation-proof investment rising at above the inflation rate,\u201d said Berkowitz.<\/p>\n \u201cIn 2015, however, the 0.94% average home price increase was, in fact, a real decline of 4.2% after adjusting for inflation, and well below the inflation rate of 5.2% p.a. for the year.”<\/p>\n The outlook for 2016 is worse, with a possible drop in nominal average home prices below zero and an inflation rate (CPI) probably higher than the 3% to 6% p.a. range aimed at by the South African Reserve Bank.<\/p>\n CPI is expected to be in the range 7-10% p.a. for 2016.<\/p>\n Yes, a good school can boost your property value a lot<\/a><\/strong><\/p>\n\n\n
\n Home price category<\/th>\n No. of sales and transfers<\/th>\n Market share %<\/th>\n % price change per annum<\/th>\n<\/tr>\n \n R10 million+<\/td>\n 2,642<\/td>\n 0.9%<\/td>\n 2.0%<\/td>\n<\/tr>\n \n R2.5 million – R2.99 million<\/td>\n 4,771<\/td>\n 1.6%<\/td>\n 0.8%<\/td>\n<\/tr>\n \n R3 million – R3.99 million<\/td>\n 5,609<\/td>\n 1.9%<\/td>\n 0.6%<\/td>\n<\/tr>\n \n R500 000 – R999 000<\/td>\n 76,736<\/td>\n 26.6%<\/td>\n 0.3%<\/td>\n<\/tr>\n \n R4 million – R4.99 million<\/td>\n 2,646<\/td>\n 0.9%<\/td>\n 0.2%<\/td>\n<\/tr>\n \n R1 million – R1.49 million<\/td>\n 33,392<\/td>\n 11.6%<\/td>\n 0.2%<\/td>\n<\/tr>\n \n R1.5 million – R1.99 million<\/td>\n 17,551<\/td>\n 6.1%<\/td>\n 0.0%<\/td>\n<\/tr>\n \n R2 million – R2.49 million<\/td>\n 8,719<\/td>\n 3.0%<\/td>\n -0.3%<\/td>\n<\/tr>\n \n R250 000 – R499 000<\/td>\n 48,534<\/td>\n 16.7%<\/td>\n -0.4%<\/td>\n<\/tr>\n \n R5 million – R9.99 million<\/td>\n 3,858<\/td>\n 1.3%<\/td>\n -1.3%<\/td>\n<\/tr>\n \n <R250 000<\/td>\n 85,155<\/td>\n 29.4%<\/td>\n -6.7%<\/td>\n<\/tr>\n \n Total \/ Average<\/strong><\/td>\n 289,613<\/strong><\/td>\n 100.0%<\/strong><\/td>\n 0.9%<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<\/div>\n More on property<\/h3>\n