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House price growth in virtually all the upmarket sub-regions of the Cape Town metro have fallen deeper into deflation, according to the FNB House Price Index for the second quarter of 2019.
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.
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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.
“Sub-regions in the Northern Suburbs – generally in the middle of the price spectrum – showed a sharp deceleration in house price growth in recent quarters.”
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.
The Western Seaboard sub-region, for instance, slid into what the index report describes as a mild contraction of -0.3% y/y in the second quarter, from 1.3% y/y in the first quarter.
House price growth in the suburbs of Bellville, Parow and surroundings – including Goodwood, Durbanville, Kraaifontein and Brackenfell – are described as holding up relatively better, but still slowed further.
READ: In real terms, SA house prices on the decline – FNB
More affordable areas
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.
Looking ahead at expected house price growth in Cape Town in general, Mkhwanazi said, 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.
“Housing market trends will remain heavily dependent on developments in the broader South African economy,” says Mkhwanazi.