Home prices for South Africa have tailed off after seeing double digit increases for most of 2007, according to the most recent news reports. The average rate of growth for all of 2007 was 8.3%, which was the lowest in the residential market in seven years, according to The Times newspaper of South Africa. The median house price in January, 2008 was 570,000 rand, or a little less than £40,000.
While South Africa has been a major seller’s market in recent years, it appears that the market has slowed and is now much more favorable for investors who are looking for second homes and long term properties in which to live or retire. House prices have been growing in the double digits consistently over the past few years, with a record high of 35.5% at one point in 2004.
Sizwe Nxedlana, Standard Bank property economist, indicated that residential property would be continue to remain more affordable this year. “There is no obvious source of growth that will provide a near-term impetus for residential property from either fiscal or monetary policy. Therefore, house price growth this year will in all likelihood be lower on average than the 8.3% growth recorded last year,” said Nxedlana.
In addition to a slowing in the median home pries, residential building cost increases have also slowed. Year on year inflation for housing construction was 4.7% for the fourth quarter of 2007, well down from the 38.8% peak recorded in 2006.
“This slowdown is believed to be reflective of a residential property market increasingly under pressure from the lengthy period of interest rate hiking, along with a slowing economy,” said John Loos, a property strategist at First National Bank. “One would expect contractor pricing power to suffer as a result,” he continued.
