Lean Joburg, fat Cape Town waiting for shake-up

03-06-2002

Houses in middle-priced suburbs are doing better than upper-priced suburbs – possibly because residents living in the upper-priced suburbs are doing less well owing to the economic slowdown. And a possible shake-up is looming to balance out seemingly overpriced Cape Town homes and underpriced Johannesburg houses.

These are some of the facts emerging from the latest Rode’s Report on the SA Property Market for the first quarter of 2002, which has just appeared.

House prices increased since the end of 1999 as a result of lower interest rates. However, interest rates have been on the up (2% points rise) since the beginning of the year, with a further hike predicted for June this year. If these hikes do not contain the rise in inflation, further increases could be expected, which eventually could be detrimental to the economy and house prices, says Rode’s Report editor Dirk de Vynck.

Houses in Johannesburg are still underpriced, which means that further increases in house prices can be expected. However, in the case of Cape Town, houses seem to be overpriced at the moment, which means that house prices could be expected to mark time for a while.

These conclusions are based on Rode's comparison of the long-term trend of house prices (as measured by Rode’s House Price Index) with building costs (as measured by the Rode Home Building Cost Index).