Emigration sales have intensified in Cape Town and foreign buyers continue to play a less prominent role in the Mother City’s residential property market, according to FNB economist Siphamandla Mkhwanazi.
Overall, house prices in Cape Town are growing at the slowest pace since the end of 2009, the FNB sub-regional house price index for the second quarter of 2019 indicates.
For Mkhwanazi, this comes as no surprise, given the weak SA economy. Furthermore, house prices in Cape Town had for some time far outpaced income growth in the region, thereby eroded affordability.The intensified pressure on house prices in affluent suburbs in Cape Town seems to be spilling over to middle-priced areas as well, according to the data.
The FNB City of Cape Town Metro House Price Index indicates that house prices in pricier areas in the Cape Town metro have fallen deeper into deflation, according to Mkhwanazi.By contrast, lower-priced areas remained resilient.
The second quarter data showed the Cape Town metro’s estimated average house price growth has softened further to just 0.5% year-on-year (y/y).In real terms – in other words taking inflation into account – average house prices have been declining for a year.Mkhwanazi expects that housing market trends will remain heavily dependent on developments in the broader SA economy.
“In the near term, low borrowing costs will provide underlying support, though the weak labour market is likely to continue to exert a drag on sentiment and activity,” says Mkhwanazi. Estate agents surveyed for the latest index report activity in the residential property market in the Cape Town metro as being “lukewarm”, although slightly improved from levels witnessed towards the end of 2018.
In response to lower demand, data shows the intensifying extent to which sellers are dropping their asking price. At the same time, there are signs, according to estate agents surveyed, that buyers are capitalising on the more favourable pricing, especially in affluent residential segments.
Furthermore, the FNB Consumer Confidence Index (CCI) indicates the Western Cape as relatively more optimistic compared to the country average and the more favourable pricing appears to have spiked demand from first-time buyers.