Since the dawn of democracy in South Africa, property prices have skyrocketed by an astounding 833%, far outstripping inflation over the same period.
Lightstone Property’s latest report, which analyses house price inflation and data from the Deeds Office dating back to 1994, highlights this dramatic surge. Currently, the annual property inflation rate stands at 3.22%, with a monthly increase of 0.42%.
The low-value segment has seen the highest annual property inflation, soaring to 12.7%. In contrast, high-value properties experienced a modest increase of 2.1%, mid-value properties 3.5%, and luxury properties 3.1%.
Provincially, the Eastern Cape and Western Cape have maintained steady annual property inflation. However, Gauteng, North West, Northern Cape, and KwaZulu-Natal have witnessed an increase, while the Free State, Limpopo, and Mpumalanga have seen a decline compared to the previous month.
North West and Western Cape are the only provinces surpassing the national property inflation rate benchmark of 3.2%. Gauteng and KwaZulu-Natal trail at 0.23% and 0.42% respectively, with Limpopo experiencing a negative rate of -1.14%.
A Long-term Perspective
Over the past 30 years, property prices have experienced a substantial increase. Lightstone’s data reveals that the average nominal sale price has surged from just under R150,000 in 1994 to R1.4 million in the first quarter of 2024. This 833% rise is significantly higher than the inflation rate of 451.9% over the same period.
To put this into perspective, a salary of R150,000 in 1994 would equate to only R840,000 today, falling short by R540,000 compared to the current average house price of R1.4 million. Coastal regions, in particular, have felt this impact more acutely due to an influx of foreign buyers and local semigration trends.
FNB’s latest Property Barometer and House Price Index (HPI) further illustrate this disparity. The data indicates significant variations in house price growth across South Africa’s major metros and other regions. Non-metro areas have experienced stronger growth, driven by semigration trends as South Africans move from central, northern urban areas to coastal towns. The West Coast, Capricorn, and the Garden Route have seen particularly robust growth, while larger metros like Johannesburg and Pretoria have experienced flat or declining house prices.
The Impact on Homebuyers
The combination of rising property prices and high interest rates has made homeownership increasingly challenging for South Africans. The average age of first-time homebuyers is approaching 40, and those with existing home loans are struggling to keep up with repayments. Since May 2023, with interest rates at a 15-year high, bond repayments have increased by an average of R4,247 per month, putting additional pressure on households.
TransUnion data indicates a 6.7% increase in new home loans in the first quarter of 2024 compared to the previous year, despite a 6.2% decrease in the average value of these loans. This trend suggests a shift towards more affordable properties as individuals downsize due to financial strain and first-time homebuyers enter the market. Despite the decrease in new loan amounts, outstanding home loan balances have risen by 7.6% year over year, and home loan delinquencies have worsened by 140 basis points compared to the previous year.
At Gerhard Barnard Inc Attorneys & Conveyancers, we understand the complexities of the current property market. Whether you are buying your first home, downsizing, or navigating the challenges of property ownership, our expert team is here to provide guidance and support every step of the way.
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