According to the latest FNB Property Barometer, affordable homes are showing the best house price growth and are selling faster.
The bank divides the market into 5 distinct categories based on property value.
- Luxury Areas (Average Price = R2.271 million)
Upper Income Areas (Average Price = R1.231 million)
Middle Income Areas (Average Price = R873,238)
- Lower Middle Income Areas (Average Price = R569,505)
- Low Income Areas (Average Price = R345,208)
The results for Q3 2017 show that the house price growth in the 3 highest priced area value bands is slowing, while price growth in the lowest priced ones has accelerated.
The strongest performer in terms of year-on-year house price growth was the Low Income Area House price index, which showed a 14% year-on-year increase for the 3rd quarter. John Loos, FNB Property Sector Strategist, does however caution that prices in this band may be distorted by subsidized housing and sell-offs of rental stock by councils. The Lower Middle Income areas showed house price growth of 7.5% in the 3rd quarter – up from 6.7% in the 2nd quarter.
In the 3 area value bands above this, however, year-on-year house price growth slowed in the 3rd quarter of 2017, the Middle Income Area Value Band from 5% in the 2nd quarter to 4.9%, the Upper Income Area Value Band from 5.2% to 4.9%, and the Luxury Area Value Band from 6.1% to 5.3%.
This, in short, all points to superior performance at the lower-priced end of the market where average prices are well-below R1m.
Homes at the upper end are taking longer to sell
The FNB Estate Agent Survey has shown a notable increase in the time on market for homes at the upper end of the market.
Although homes at the upper end of the market tend to stay on the market for longer, in recent times the gap in the average time of homes on the market between higher and lower value homes has widened.
The table below shows how time on market for higher value properties has increased:
Given the state of the economy and the low levels of consumer confidence, the shift in demand towards more affordable areas should not come as a surprise. Home buyers are under increasing financial pressure and affordability has become an overriding factor for those looking to enter the enter the market.
