Top End of the Market Changes
Absa’s latest Property Trends Reports reveals that the average price of houses in the top end of the market has been rising and the improved economy is to blame.
Real disposable income growth has been 4.7% per year since 2000 and 6.6% in 2006, according to Absa and John Loos of FNB says that 5% economic growth is driving strong growth in higher income purchasing power.
More people with high levels of purchasing power mean higher demand. The fall of interest rates after 1998 and then again after 2002, meant an improvement in the affordability of the luxury end and a huge surge in demand.
The top end of the market has also felt the effects of decreasing affordability levels and the lower end of the market has attracted a lot more buyers than in the past.
The new National Credit Act will not have as big an effect on the luxury market as it does on the lower end of the market as most of the buyers in the top end of the market can afford to buy their property in cash.
According to Absa’s index the upper end of the market – priced between R2.7m and R9.9m - rose by 10.9% last year, which is up from 8.1% in 2005. Early in 2007 Absa has reported that growth in the luxury end of the market has accelerated.
For as long as interest rates remain on their current rising trend, it is anticipated that the lower end of the market will be the best performer in the next few years.