Financial Planning & Wealth Management

A look at Property Prices in South Africa

As early newsletter readers may know, soon after I left Johannesburg for Knysna in December 2022, I put my Joburg flat on the market. Well, it still hasn’t sold. And I’ve just signed a lease agreement with the second set of tenants.

I purchased the place back in 2017 for R1.15m, and with bond registration and conveyancing fees, the total price came to about R1.2m.

As I talk to the local estate agents today, they tell me I would be lucky to get R900 000. That’s a 25% decline in capital value over 7 years. Ouch.

I had a look at the property trends here in Knysna. In 2017 the average selling price was R1.995m. Today it’s R3.625m. That’s an 81% increase or 8.91% annualized compounded return since 2017. 

Chart: Property trends in Knysna

Source: Property24

 

 

 

Let’s have a look at property price appreciation by province.

 

The below graphic comes from Lightstone who collate data from the Deeds Office registry in South Africa, so it’s a reliable source. It shows property price appreciation across South Africa for 2023.

 

Chart: 2023 Provincial Property Inflation Status

Source: Lightstone, Residential Property Indices, Data as at end January 2024

 

The Western Cape experienced the best house price appreciation last year while Gauteng had the worst.

 

Of course, the above chart is a snapshot. A better depiction is to look at the property prices across time. The chart below illustrates this.

 

 

 

 

Chart: Annual property inflation: provinces

Source: Lightstone, Residential Property Indices, Data as at end January 2024

 

For those unfamiliar with reading charts –

  • Western Cape property prices increased at about 10.5% for both 2017 and 2018
  • The rest of the country experienced increases of just 5% for these years
  • From 2018 onwards, all property price inflation decreased substantially – the average was closer to 3% per annum from 2018 until today.
  • The North West province had the worst property price growth, averaging about 2% between 2017 and 2023
  • Gauteng property price inflation averaged about 2% between 2017 and today.
  • KZN averaged about 3% per annum between 2017 and today. I would have thought it would be lower after the riots.

 

The far higher price appreciation for the Western Cape in 2017 and 2018 coincides with the first great semigration of the inlanders. Let’s have a look at how costal property compares to inland property.

 

The chart below compares coastal property to vs non-coastal property price inflation.

 

Chart: Property Price Inflation coast vs non-coast

Source: Lightstone, Residential Property Indices, Data as at end January 2024

 

We see the initial dispersion in house price appreciation in 2017 and 2018, and then a widening of the gap in the last year post Covid.

 

I would make a final note that inland property price appreciation has consistently been below inflation. This means the real value of these homes has declined over the past 7 years.

 

This is a tough pill to swallow as the primary asset in most families is their home. The data shows that outside of the Western Cape, home prices have declined in real terms.

 

I really hope this trend reverses, not just for myself, but for the majority of South Africans living outside the Western Cape.

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 MattFin is a blog that focuses on wealth management, investments, financial markets and investor psychology. I build financial plans and portfolios for families and individuals

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