Property problem for South Africa’s powerhouse province

Gauteng’s property market is seeing incredibly weak property price inflation, with the picture especially bleak in Johannesburg.

According to Lightstone’s latest Residential Property Indices, national year-on-year house price inflation was at 3.93% by the end of August, dropping slightly from July.

“We are seeing the Provinces of Gauteng, KwaZulu-Natal and Eastern Cape, and to a lesser degree, the Northern Cape being the provinces that have shown a slowdown in property inflation,” Lightstone’s Hayley Ivins-Downes said.

Annual property for properties in the Low-Value segment was 5.7%, slightly higher than the 5.6% for properties in the Mid-Value segment and far higher than for properties in the High-Value and Luxury segments at 3% and 3.5%, respectively.

Looking at the data, Gauteng’s property price inflation was the lowest of all provinces at 1.18%, despite being the economic hub of the country.

This is far lower than Limpop’s 7.47% and the Western Cape’s 6.45%, with the closest province being KwaZulu-Natal at 2.86%.

“There are many reasons around this, essentially driven through many economic factors,” Ivins-Downes said.

“Gauteng has always been the employment province of the country, and so when we are experiencing widespread unemployment, service delivery issues and high consumer inflation in the country, Gauteng will feel this the most, and as a result, the property inflation is impacted, and we are seeing the slowdown in areas of what sellers are attaining for their properties.”

The picture is far worse for South Africa’s financial hub, Johannesburg, with inflation now in negative territory, meaning that house prices are actually declining.

“The inflation in Johannesburg is showing a negative percentage which shows the buyers’ market principle,” Ivins-Downes added.

“As with all property indicators, there are cycles, and to experience a market rebound, we need some relief for the consumer, and a decrease in Interest rates would assist in creating some level of activity in the property market.

“The underlying economic factors, if improved, would contribute greatly, but that would require a longer view on addressing the countries challenges.”

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