A new global survey shows that nowhere else in the world have house prices increased more than in South Africa.
According to the survey, house prices in South Africa increased by an average of 32,6% in 2004, followed by Hong Kong at 27,2% and Spain at 17,2%.
The survey was undertaken by ResearchWorldwide.com — a commercial real-estate information portal. The Economist provided ResearchWorldwide.com with the figures for South Africa.
With this global assessment on property prices, ReasearchWorldwide.com warns against rumours of a pessimistic future view.
“Booming house prices in many countries worldwide over the past few years have prompted such august bodies as the International Monetary Fund, The Economist and many others to predict that the global house-price bubble will inevitably burst. These predictions, which started in 2002, are currently intensifying.
“Like everywhere else in the world, opinions have been expressed of the possibility of a bubble situation in South Africa. Those rumours should not be taken too serious,” Andrew Golding, chief executive of the Pam Golding Property Group, told the Mail & Guardian Online this week.
“An increase of 32,6% is not sustainable but we believe that, given the dynamics in the South African property market, an increase of 12% over 2005 can be expected.
“There are a number of reasons why the South African market is a bubble that is not about to burst,” said Golding.
“The economic indicators point to a strong real-estate market. The South African economy is still growing and the sentiment is high.
“Secondly, there is an emerging middle class that is benefiting for the first time from this economic growth. For this group, home ownership is an absolute priority.
“Real estate has proven to be a solid investment; we see more and more investors choosing property.”
ResearchWorldwide.com emphasises that rumours of a bursting bubble in some countries must be assessed individually. The property market cannot be compared with the stock market.
“Individual peculiarities of each country must be assessed from a demand, supply and affordability point of view to arrive at a realistic outlook for worldwide house prices in 2005.
“Each country has its own unique set of circumstances, which affect demand, supply and the affordability of housing. The residential market is an imperfect and inefficient market and should not be compared to the perfection and efficiency of stock markets and bond markets around the world,” says ResearchWorldwide.com.
“South Africa … long suffered from political uncertainty, which caused reduced demand from 1984 to 1999,” states ResearchWorldwide.com.
“The housing market in South Africa took off strongly in 2000, six years after the first democratic elections … During the boom phase since 2000, South Africa has experienced a 17% [a year] rise in house prices in nominal rates, and 11% [a year] in real terms.
“After 15 years (1984-1999) of negative growth in house prices, in real terms, 11% [a year] since 2000 is still playing ‘catch up’.”