Cheaper to buy home than build

Category Market

Existing homes are 29,5% cheaper than new homes in the current market and building an average house will cost almost R1,5-million compared with the current price of an existing house of the same size at almost R1,1-million according to Absa latest Housing Review for the third quarter of this year. Jacques du Toit, senior property analyst at Absa says that the average price of homes in the luxury segment of the market declined in real terms by 0,5% year-on-year after nominal growth of just 3,1% in the third quarter. “In the affordable sector, the average price of a house increased by a nominal 3,2% year-on-year to R310 500 but declined by 0,3% year-on-year in real terms. In the middle segment, house price growth averaged 5,4% year-on-year, bringing the average price to R1 021 500 but real growth of just 1,8% was recorded in the third quarter,” he says. Du Toit points out that in the middle segment, house price growth of 11% year-on-year was recorded in the first quarter but this slumped to 5,4% in the third quarter. “Nominal house price growth of about 7% is expected for the full year with 2011 price growth projected to remain low,” he says. “Real house price growth will depend on nominal price trends and consumer price inflation,” he says. He points out that the ratio of household debt to disposable income was marginally lower at 78,2% in the second quarter of this year, down from 78,7% in the first quarter. “After rising markedly in the first half of the year, both nominal and real year-on-year price growth slowed down in the third quarter of 2010 and this is partly due to strike action in various sectors, continued tight employment conditions, lower real household income growth and a slow pace of interest rate cuts,” Du Toit says. He says that nominal year-on-year price growth in the middle segment of the market was lower in the third quarter and, in real terms, price growth has tapered off. The figures are based on the value of houses financed by ABSA. The average nominal value of affordable houses of between 40 sqm and 79 sqm and priced up to R430 000 increased by 3,2% to R301 500 but in real terms the average value dropped by 0,3% year-on-year in the third quarter after falling by 1,3% in the second quarter. In the middle segment for houses between 80 sqm and 400 sqm and priced up to R3,1-million, year-on-year price growth slowed to 5,4% in the third quarter from 11,7% in the second quarter. “The real value of the middle segment housing increased by 1,8% year-on-year in the third quarter, down from 6,9% in the second quarter,” Du Toit says. For small houses between 80 sqm and 140 sqm nominal growth was 20,9% year-on-year and real growth was 16,7% down from the second quarter figures of 23,8% and 18,5% respectively. For medium sized houses (141 sqm to 220 sqm) the nominal price rose by 4,9% year-on-year with real growth of 1,3% year-on-year in the third quarter compared with second quarter growth of 6,3% and 1,7% respectively. Large houses (221 sqm to 440 sqm) third quarter nominal growth of 1,6% year-on-year and but real house price growth dropped by -1,9% year-on-year in the third quarter, down from 5,5% and 1% respectively in the second quarter. In the luxury housing market, for houses valued at above R3,1-million to R11,5-million the average nominal value was up by 3,1% year on year to about R4,5-million in the third quarter after falling by 0,4% year-on-year in the second quarter. “After adjustment for the effect of inflation, the average real value of luxury houses was down by 0,5% year-on-year in the third quarter after falling by 4,7% year-on-year in the second quarter,” he says. Referring to provincial prices, Du Toit says that prices varied considerably with nominal price growth of 3,3% year-on-year being recorded in Gauteng while, in the Free State, prices rose by 12,3%. “In the major metropolitan areas, trends in nominal house prices ranged from a decline of 2,3% on the East Rand in Gauteng to strong growth of 20% year-on-year in Bloemfontein,” he says. He says that average price growth of about 7% is forecast for 2010 but warns that prices are unlikely to rise much in 2011.


Submitted 28 Oct 10 / Views 5413