Rapidly rising prices in the Western Cape is making home ownership for first time buyers increasingly difficult.
Although house price growth in the Western Cape has started to slow, it is still well above other major regions in South Africa. And this does not bode well for first time buyers in the province.
House price growth in Western Cape dropped from 10.6% in the first quarter of 2016 to 6.2% for the same period this year, reports FNB Household and Property Sector Strategist, John Loos. This is way above the 1% growth in KZN, 0.7% I Gauteng and negative growth of 1% in the Eastern Cape.
The Western Cape has been the stat performer in the South African property market in recent years, with much of the growth driven by semigrants from other parts in South Africa. Perceived good governance, job opportunities and an attractive lifestyle have proven to be big drawcards for middle to higher income repeat home buyers from other provinces.
Strong house price growth driven by demand now appears to be creating an affordability challenge for first time buyers who are on much tighter budgets than the repeat buyers moving into the region. FNB’s Estate Agent Survey has for some time shown a low rate of first time home buying in the Cape Town metro. Cape Town shows the lowest rate of first time buyers at just 8%. This is far lower than Joburg’s estimated 27%, Tshwane’s 21% and eThekwini’s 14%.
Western Cape has the highest average house price
First time buyers in the Western Cape face the most expensive average house prices in South Africa. Comparing the average price of homes transacted, according to the FNB House Price Indices, the Western Cape is the most expensive with an average price of R1.421 million, with Gauteng the 2nd most expensive at R1.041 million. This is followed by KZN at R1.025 million and the Eastern Cape at R0.83 million.
This is how much house prices have grown since 2010
Since the beginning of 2010 (the start of the post- 2008/9 recession recovery), the average house price for the Western Cape has risen cumulatively by 78.2%. By comparison, the next strongest growth was in KZN, with a far more moderate 46.4% and Gauteng with 41.2% over the same period. If house prices in the Western Cape continue to grow at such a rapid rate, the dream of home ownership for many first time home buyers will remain out of reach
“The Western Cape continued to have by a significant margin the fastest average house price growth in the 1st quarter of 2017, compared to the rest of the country’s major residential regions. However, mounting affordability challenges in that province are believed to have caused some slowing in its house price growth in recent quarters,” concluded Loos.