South Africa: Prices of small houses increasing

14 October 2014

A recent report that analyses First National Bank’s house price indices for full- and sectional-title homes of various sizes has found that prices of smaller houses are accelerating faster and showing stronger growth than those of larger houses.

Rode’s Report on the South African Property Market author and property economist Erwin Rode said the depressed economy and tight credit criteria of banks could be forcing buyers to scale down the size of house they buy.

“Nevertheless, over the past year, a slight softening in the credit standards of banks seems to have buoyed house prices in general, which explains why they are, in general, again showing growth slightly in excess of inflation,” he outlined.

Rode said despite slightly better credit from banks, limiting factors for house prices remained: weak growth in formal employment; waning after-tax household incomes; high levels of household debt.

“What’s more, the Monetary Policy Committee remains of [the] view that interest rates will have to normalise again,” he said.

Another key finding of the report was the very moderate growth in the market rentals of office space – except in Cape Town which experienced 5% growth.

“The underperformance of the manufacturing and retail sectors of the economy does not bode well for the demand for manufacturing and warehouse space to rent,” Rode noted.

By: Natalie Greve

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