Due to a number of reasons, property prices along Cape Town’s Atlantic Seaboard have taken a knock over the past year.

Some have blamed the pending Day Zero. Then there’s FNB household and property sector strategist John Loos, who has his own thoughts on the matter.

He spoke to Moneyweb:

“It is possible that a slowing in the rate of foreigner buying of SA property last year, due we believe to a widespread negative sentiment towards South Africa at the time, could have had some negative impact on price growth in this sub-region, which is typically big on foreign owners and buyers.

“But again, we believe that 122.8% cumulative house price growth of the past five years has been key in leading to major affordability challenges, which ultimately must slow demand from both foreigners and locals alike.”

What flows must ebb sooner or later.

You see, since 2013, average house prices have more than doubled in three popular Cape Town areas, including two of the three most expensive: Atlantic Seaboard by 123%, City Bowl by 113% and the City’s eastern suburbs by 105%.

That being said, there’s a notable cooling along the Atlantic Seaboard:

The February FNB Property Barometer for City of Cape Town House Price Indices highlights this “noticeable” slowing across these regions of the metro “against Table Mountain”, which Loos argues is a direct result of home affordability challenges here are contributing to a “natural” price growth slow down.

But, thankfully, it’s not all bad news for the peninsula – the northern suburbs are styling:

The broader Bellville area accelerated from 9.5% in Q4 of 2016 to 13.3% in the last quarter of last year, while the North Eastern Suburbs (Durbanville, Kraaifontein, Brackenfell) have gathered pace to 10% year-on-year in the fourth quarter.

Growth in the Cape Flats and Mitchells Plain/Eerste Rivier areas has been equally robust, with the latter actually jumping to 20.83% in Q4 2017, the highest level of growth across the metro’s sub-regions.

And it’s because of those numbers that Loos doesn’t believe that the drought, and possible further water shortages, is the reason for the noticeable impact on house prices.

At least not yet:

“Going forward, however, should the drought conditions deteriorate further, at some point it is conceivable that they may become ‘recessionary’ for the Western Cape economy, should they reach a level where much industrial production needs to be scaled back and a lack of water hampers tourism and other economic sectors.

“A negative economic and employment impact should ultimately be a negative housing market impact. But we don’t believe that it has got to this level yet, and much will depend on this Winter’s rainfall.”

Fingers and toes crossed that along with Cyril Ramaphosa, winter delivers, too.

[source:moneyweb]