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South African Property Market Has Slowed

News Posted On: 08 March 2012

Last year property prices in South Africa fell by 2.6%, a disappointing result, especially as prices rose 2.7% in 2010, and a far cry from the boom years of 2000 – 2006 when prices grew by an average of 20% every year.

Property price growth reached its peak in October 2004, with annual growth of 32.5%. However in 2008 the boom came to an abrupt end in the wake of the global financial crisis. In 2010 prices briefly recovered which was partially due to South Africa hosting the FIFA World Cup, but any real recovery was held back by worries over economic growth and rising inflation.

It's predicted that property prices will rise by about 2.3% this year, but when adjusted for inflation will have in fact fallen. Factors affecting the market include South Africa's economic recovery, an oversupply of housing, declining investment into infrastructure and increasing mortgage rates.

Last year South Africa's economy grew by 3.1%, and household income rose by 4.6% which may seem quite good. However unemployment reached 25% during the third quarter of 2011, and inflation is rising. On the plus side interest rates are at a 30 year low.

This has had the effect of reducing average mortgage payments by 33.5%. Inflation began to rise last year, and although interest rates have remained stable it's expected that they will have to increase later on this year.

While property prices may be declining slightly, some homes are still holding their value well. Coastal properties are still very popular amongst buyers, and property prices in the Western Cape haven't fallen significantly during the past few years. In comparison to similar properties in the Mediterranean, coastal property in South Africa offers real value.

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