Homeowners in Gauteng’s three main housing markets are losing value in their homes. For Q2 2017, the City of Tshwane’s estimated average house price growth rate was 4.48% year-on-year, with Gauteng Consumer Price Index (CPI) Inflation at 5.2% year-on-year for the same quarter of 2017. This translates into negative real house price growth for Tshwane to the tune of -0.72% year-on-year, Ekurhuleni -1.4% and Joburg -1.8%.
This is according to FNB’s Q2 Gauteng Sub-Region House Price Index which tracked the three Gauteng metros which have been undergoing a gradual “real house price correction for much of the time since the beginning of 2008”.
This is according to FNB’s John Loos, who said that since Q1 2008, Tshwane’s cumulative real house price decline has been -22.7%, Joburg -23.6% and Ekurhuleni -25.9%.
“Ongoing real house price ‘correction’ in the Gauteng metros is contributing positively to a healthy balance between demand and supply of housing, and relative ease of entry for first-time buyers compared to certain other major regions,” said Loos, noting that Tshwane and Joburg regions (City of Joburg as well as Ekurhuleni) continued to show estimated levels of first-time home buying to be above that of the national average of 21%. “For the first two quarters of 2017, first-time buyers were estimated at 28,58% of total home buying in greater Joburg, and 21.8% in Tshwane.”
First-time home buyers are on average more financially constrained than the more established repeat home buyers, and thus very sensitive to home affordability levels.
Yesterday’s Monetary Policy Committee decision to shave a quarter percent off the Repo rate (prime from 10.5% to 10.25%), is probably just a tentative move to see if the economy responds in any positive way – growth for the year has been revised downwards from 1% to 0.5%
Sellers, however, better hope that the interest rate cut does something to lift buyer sentiment because, according to the Q2 2017 Gauteng Estate Agent Survey, the estimated average time of homes on the market prior to sale is around 12 weeks.
“Greater Joburg is at 12.86 weeks and Tshwane at 9.57 weeks – the two lowest average times on the market of the major South African metro regions,” said Loos. “Cape Town has a significantly longer 16.21 weeks, Nelson Mandela Bay at 16.29 weeks and Ethekwini at 20.93 weeks.”
While a certain degree of positive sentiment may convince some buyers to purchase, purchasers are not seeing house prices rise beyond their means and are therefore feeling less pressure to buy in the immediate term. Buyers also know that the longer sellers wait to find qualifying buyers, the more inclined they will be to drop their asking price – either on their own or through negotiation.