- South African residential property prices are dropping when adjusted for inflation, a new FNB report shows.
- FNB estimates that property price growth will continue to be stifled while there is an oversupply in the market.
- While overall real property prices declined, low-income and lower-to-middle-income properties showed above inflation growth.
For a second year residential property prices in South Africa have dropped when corrected for inflation.
And the situation is only set to improve once oversupply in the market has been reduced.
The FNB Property Barometer for June, released on Wednesday, showed that property prices increased by only 3.3% year-on-year in May, while South Africa’s latest consumer price index (CPI) inflation stood at 4.5%.
This means property prices declined by 1.2% in real terms.
“We read [this] as a continuation of a downward adjustment [of property value growth] in line with subdued economic activity and lower disposable income levels,” FNB’s Siphamandla Mkhwanazi said.
While political uncertainty before the elections has slightly lifted, which will improve sentiment, it will likely take longer before that filters through to economic activity such as property purchases, he said.
“For the residential property market, excess supply in the higher-end segments [also] must clear before we see an overall house price acceleration.”
While average real residential property prices are in decline, the barometer showed that low-income properties with an average purchase price of R395,000 saw a 16.3% price growth, well above inflation.
The lower-middle income segment, with an average purchase price of R638,200, saw a 6.8% growth, growth of 2.3% above inflation.
The middle segment (4.2% growth) with an average purchase price of R935,000; the upper-income segment (3% growth) with an average purchase price of R1.3 million; and luxury value segment (0.8% growth) with average purchase price R2.3 million, all showed below-inflation growth.