Homes in South Africa are losing value – except for the very cheap ones

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  • Inflation eats away at South African housing values, new data shows – in general.
  • Really cheap housing properties still beat the CPI with price increases, even in May, when consumer inflation reached 6.5%.
  • House prices are still likely to outpace inflation in 2021, but my growth is slowing down, while my inflation is rising.
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The real value of South African homes is falling, new data from property and auto information company Lightstone shows, across regions and value bands – except for the lower class of residential properties.

In May, the average year-on-year inflation rate for residential properties was at 4.46%, Lightstone said.

That’s slower than the 6.5% for consumer price inflation (CPI) measured by Statistics South Africa in May.

See also | Inflation was a staggering 6.5% in May – but not bad enough in the Western Cape

The difference between consumer inflation – or the rate at which money loses value – and increases in housing prices eats away at real prices. In April, Lightstone measured property inflation at 4.6%, while inflation came in at 5.9%. And in March, property inflation was 4.7%, while the CPI was at a level of 5.9%.

The difference means a property worth R1 million effectively lost R50,000 of its value to inflation during the three months.

Global inflationary pressures, largely due to Russia’s invasion of Ukraine, remain unabated, and many countries are struggling with higher consumer inflation rates than seen in South Africa.

But one property category has consistently outperformed consumer inflation in price growth, Lightstone data shows.

In the “low value” segment – for property sales of less than R250,000 – the May inflation rate came in at 7.2%. That’s slightly slower than the 7.6% in April, which is slower than the 8.2% recorded in March.

This means that houses valued at R200,000 in early March are effectively getting a value of less than R11,000 from now on.

Overall housing property inflation was at 5.8% in the first quarter of 2021 and reached 6% in the second quarter, Lightstone data showed, before falling again to 5.8% in the third quarter and then to 5.3% in the fourth quarter.

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