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Until fairly recently, Cape Town’s property prices had been on the up and up.
Then, over the past six months or so, you’ve seen headlines like Cape Town Property Experiencing Negative Growth, With More To Come, Bad News For Property Owners In Cape Town City Bowl, Southern Suburbs, Atlantic Seaboard and Cape Luxury Property Market: 20% – 50% Reductions Are Normal.
Not exactly ideal if you’ve just snapped up property and were hoping for the value to soar, right?
Now, according to Fin24’s reporting on the FNB House Price Index for the second quarter of 2019, “house price growth in virtually all the upmarket sub-regions of the Cape Town metro have fallen deeper into deflation”:
In the city’s most expensive sub-region, the Atlantic Seaboard, house price growth slid to -3.7% year-on-year (y/y) in the second quarter from -3.2% y/y in the first quarter of 2019.
In the City Bowl, regarded as the economic hub of the region, house price growth registered -5.7% y/y from -3.6% y/y in the previous quarter. House price growth in the Southern Suburbs, which includes the suburbs of Claremont, Newlands and Observatory, contracted by 4.9% y/y from -2.2% y/y in the first quarter.
In the so-called Eastern Suburbs – including Woodstock, Maitland and Pinelands – house price growth declined by 5.3% y/y from -3.2% in the first quarter. According to the index report, this is despite house prices in this region for some time having held up better than the rest of the regions surrounding Table Mountain.
“Pressure appears to be spilling down the price ladder, and away from the mountain,” says FNB economist Siphamandla Mkhwanazi.
Whilst the value of luxury properties have taken a battering, it’s the performance of some of the ‘middle of the price spectrum’ properties, like those in the Northern Suburbs (just on the other side of the Boerewors Curtain) that may shock:
Mkhwanazi explains that, for some time, these regions were perceived as offering more affordable housing opportunities, as affordability deteriorated rapidly nearer the mountain.
“Ultimately, prices overshot and completely counteracted their initial attractiveness. Unsurprisingly, as demand slowed, price growth slowed,” says Mkhwanazi.
Cape Town’s Western Seaboard (areas like Milnerton, Bloubergstrand, Big Bay, Table View and Sunningdale) saw a mild contraction in the second quarter, whilst others like Bellville, Parow, Kraaifontein and Brackenfell held up better, although price growth still showed signs of slowing.
It’s not all doom and gloom, though, with some areas still performing well:
The more affordable sub-regions in the city, which incorporate so-called “township” areas, are performing well above the city’s average and remain in the double digits as far as house price growth are concerned, according to the index.
The latest data shows the Elsies River, Blue Downs and Macassar region has done very well in terms of house price growth in the first half of 2019.
In summary, tough in the ‘burbs’, better in areas like those mentioned above.
Casting his mind further ahead, Mkhwanazi says “the weak labour market is likely to continue to exert a drag on sentiment and activity”.
[source:fin24]
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