House prices continue steady climb

Year-on-year house price growth rose from 7.7% in the first quarter of the year to 8.6% in the second. (M&G)

Year-on-year house price growth rose from 7.7% in the first quarter of the year to 8.6% in the second. (M&G)

Year-on-year house price growth rose from 7.7% in the first quarter of the year to 8.6% in the second.

However, John Loos, property strategist at FNB said affordability was still a big issue in property market.

Amid slow wage growth and no sign of interest rate reduction, housing affordability had significantly slowed since 2009.

He said there was a major improvement in home affordability for the average income earner from the second quarter of 2008 until the end of 2010.

This was a result of the combination of average wage growth outstripping growth in house prices, and an interest rate drop over the period.

"However, the most recent data point, the fourth quarter of 2011, showed both measures of affordability having improved only marginally on the fourth quarter of 2010, with most of the affordability improvement happening in 2009 and 2010," said Loos.

Value for money
The average remuneration inflation as at the end of 2011 was down to 6% year-on-year, significantly slower than 2009 and 2010, when it reached 15% at certain stages.

Loos said consumers were under financial pressure and were looking for value for money.

"We believe that this value for money search has caused a better price growth performance in the full title segment in recent years."

By comparison, the sectional title segment showed average year-on-year price growth of 5.1% in the second quarter.

Sectional title refers to separate ownership of units or sections within a complex or development.

Full title segment is where the consumer buys the ownership rights of the property and the land on which it is built.

Losing steam
Loos said the superior performance of the affordable housing segment could be starting to lose its steam.

"We say this because the two-bedroom full title sub-segment, which is believed to be strongly driven by the affordable segment, showed some slowing in average price growth in the second quarter, although still performing strongly with 12.3% year-on-year growth."

The four bedroom sub-segment also decreased in price growth, from 6.4% to 5.6%.

The three bedroom segment still performed impressively in the second quarter, accelerating average price growth to 12.3% year-on-year, from a previous rate of 10.5%.

Of the main sub-segments of the sectional title segment, properties with fewer than two bedrooms saw an increase in price from 2.8% to 7% year-on-year in the second quarter of 2012. – Sapa

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