Property prices to grow at a snail's pace PDF Print E-mail
January 11 2007 at 11:32am
By Dominique Herman

Residential property prices in the Western Cape will not fall, but are likely to rise at a lower rate than in the past couple of years, according to Standard Bank property analyst Gina Schoeman.

The Western Cape was in "a very healthy" position because it needed a period of stabilisation after the boom, she said.

South Africans tended to forget about the huge suburbs - such as Bellville - where transactions were more indicative of the overall property trend.

"The Western Cape is on quite a stable path as far as property goes," Schoeman said.

The prices of "small pockets" of land, such as in Stellenbosch and central Cape Town, were continuing to grow strongly, as were those of properties in highly select enclaves such as the Atlantic seaboard, where there was limited stock.

"Property is about location. There is also a huge wealth base in Cape Town."

Next year, increases in prices were expected to pick up speed, moving from single into double digits, to about 12 percent, Schoeman said.

The Absa House Price Index predicts double-digit growth in prices will coincide with the lowering of interest rates that is forecast to occur next year.

Erwin Rode, property economist and chief executive of Rode and Associates, said interest rate hikes did not have an immediate effect, but a "lag effect", on house prices. The slowdown in property transactions above the R800 000 mark only reinforced the trend that had been in place before the hikes.

At the lower end of the market, however, the creation of more jobs meant more potential home-owners were entering the market.

As it was not as easy for developers to make a profit on these properties, there was not an oversupply.

The residential property boom that had begun in 1999 at the top end of the price spectrum had filtered down and was now reaching the townships, Rode said.

Absa senior property economist Jacques du Toit said the focus for those looking to get into the market had shifted to more affordable and smaller properties.

Rode said the commercial property industry was out of sync with the residential property industry and its boom was only beginning.

The boom in industrial property had begun about two years ago.
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