KZN PROPERTY MARKET - HOW ARE WE FARING?

It's time to banish the knee-jerk property market conversations around the dinner table. The reality is, although the current global economy has a knock-on effect on our own, KZN is doing better than we think. 

Courtesy of FNB's Property Barometer 

John Loos, Household and Property Sector Strategist for FNB, breaks down the economic drivers in Kwazulu-Natal, and although he, like everybody, acknowledges a gentle slowdown across the board - we're all conscious of that - he looks at the facts and figures: "South Africa, being the open economy that it is, can't escape the pressures of global economic weakness and risks. KZN's residential market is no exception, with the region’s economy being highly manufacturing and global trade-driven."KZN's economy is dependent on manufacturing and trade - we have two of South Africa's major harbours cities/towns - so we're vulnerable to global economic pressures.

Loos says, "With these economic headwinds, along with interest rates which have been creeping up gradually for the past two years or so, it should not be surprising to see signs of slowing in the province's economy, and in its residential market." 

THE GOOD NEWS

But Kwazulu-Natal is not the worst when it comes to market strength, says Loos: "It finds itself somewhere in the 'middle of the pack', not as advanced in the slowdown phase as Gauteng yet, but at the same time not 'outperforming' as could be said of the Western Cape market. 

"He points to the Ethekwini Metro as 'something of a stabilising influence on KZN, seeing its own house price index year-on- year growth accelerate mildly to 5,8 percent year on year, from a prior quarter's 4,8 percent. "While we have made mention," he says, "of the province's, and indeed, eThekwini Metro's exposure to global economic pressures, the Metro remains a far more developed and diversified economy than the smaller centres, and could thus still perform better than surrounding towns in terms of slowdown."

SUPPLY AND DEMAND STABLE

Loos believes the market still appears fairly well balanced between supply and demand, with an average time of homes on the market hovering near three months (12 weeks and 2 days in the first quarter of 2016).

"We are reasonably happy with the state of the residential market in general, currently, as it possesses little in the way of 'over-exuberance' or speculative activity which can periodically cause market 'overshoots' that end badly. Mortgage lending has remained relatively conservative since the end of the pre-2008 boom period."

"The province’s housing market, over the past 15 years, has performed relatively strongly. Its average house transaction price (not home value), according to FNB's calculations, was R1,017m, the third most expensive province, similar to Gauteng’s R1,032m, although somewhat lower than the Western Cape's R1,353m.

"In terms of cumulative house price growth since the first quarter of 2001, when the FNB provincial house price indices started, KZN has recorded 320.3 percent, more than Gauteng's 286 percent and Western Cape's 290 percent."