The SA Daily
07 August 2020
Property prices plummet
- Despite mortgage application volumes rising from April lows during Level 5 lockdown, and even surpassing pre-pandemic levels, residential property prices, per our inhouse Standard Bank House Price Index (HPI), grew by just 2.6% y/y in July, after growth of 4.0% y/y in June. Applications were still concentrated amongst entry-level and small properties but the largest m/m increase in number of applications was recorded in small- and medium-sized properties.
- Notably, luxury residential property prices have been under severe pressure for an extended period, contracting 12.2% y/y in July, a ninth month of contraction. At a median price of R3,782,042 in July, luxury properties have lost R317,061 of their market value since January 2020. Large residential property prices are also under pressure, having contracted 2.3% y/y in July, after contracting 0.5% y/y in June, at a median price of R2,441,613.
- Residential property prices will likely keep moderating, averaging 2.1% y/y this year, from 4.0% in 2019, as the pandemic puts pressure on employment and income. The cumulative 300bps interest rate cuts by the SARB since January and downtrading by property market participants, that under normal circumstances would have purchased large and/or luxury residential properties, should provide some support to small- and medium-sized residential property prices. First-time buyers in good credit standing with healthy balance sheets and confident about employment prospects will likely support entry-level and small-sized residential property price growth. Still, we’d foresee a contraction of 3.7% y/y in residential property prices next year, with the forecast risks high and the trajectory depending on the evolution of the pandemic and the pace of GDP and employment growth.
Read PDF