Property boom is moving down market
Here’s the last of the four “update” posts to cover the period while I was away. After yesterday’s revelation that the supply of new housing stock is limited and capacity to accelerate the rate of delivery appears very limited, the resale market seems to be the only option. Unfortunately, however, the secondary (resale) market will not offer salvation on its own. Affordable housing stock is in short supply all round, whether new build or existing.
Recent press reports have highlighted a slow down in
In part, the slow down has been due to a sobering market that has been struggling the afford the higher and higher property prices. The recent interest rate hike, and the threat of more hikes this year, is also contributing to a declining rate of house price growth. FNB property economist John Loos expects that house price inflation will bottom out at an average rate of 8,4% next year, considerably down from its 35% peak in September 2004.
This is at the top end of the market. At the lower end, reports are that the market continues to flourish. Properties costing less than R600 000 (below the national average property price of about R798 000) reportedly find a buyer quickly and can be resold in a year or two at a 15-20% profit. In many instances, however, this is an investor seeking to participate in the ‘buy-to-let’ market – a form of downward raiding that is driving prices up.
Quite clearly evident in these reports, is that the property market is not uniform, and that the focus of the press on the high end is actually only relevant to a minority of the population. The continued appreciation of the lower end of the market does mean that lower income earning property owners will benefit, but that property ownership will continue to be a significant challenge for those not yet in the market.
