Why R800k houses make the best property investments

Property Trends: ABSA House Price Index – May 2010

Prices of smaller-sized houses are rocketing at the moment, that’s according to the May 2010 ABSA House Price Index. House prices in this segment have grown by 20% since April 2009. The average cost of smaller-sized houses (as measured by ABSA) is currently, R789 500.

In comparison, medium and large houses only grew by about 6% between April 2009 and April 2010.

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So why are small houses experiencing such good growth rates?
Small houses are described by ABSA Home Loans as properties between 80 sq/m and 140 sq/meters.

These houses are:

  • Cheaper than medium and large-sized houses
  • Consumer less electricity and water
  • and, Attract lower rates & taxes.

Jacques du Toit, senior property analyst at ABSA Home Loans, believes that higher income earners are still feeling a lot of pressure due to high household debt. These types of buyers would usually look to invest in a big properties, but are being forced to look at smaller, more cost effective properties.

To add to that, the rising cost of electricity and water in South Africa has made smaller homes more attractive, as these properties are often cheaper to maintain.

Finally, du Toit, believes that many property investors have also become more active in the smaller-sized housing segment, following the recent property market recovery.

Below is a table of the % growth over 12 months & the average value of houses in each segment:

Small Houses   80m² – 140m²   20%   R789 500
Medium-Sized Houses     141m² – 220m²   6.2% R979 300
Large Houses  221m² – 400m²  6.4% R1454 400

 
Forecast:
The forecast for the property market remains fair good, with inflation dropping and interest rates remaining steady until early 2011. ABSA expects the housing market to continue its recovery for the rest of 2010.

Click Here for more details from the ABSA HOUSE PRICE INDEX

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2 Comments For This Post

  1. Vincent Kalane Says:

    I am a construction company owner, i have many clients who want to apply for home loans. Can you please inform me of your policy regarding financing of construction companies. If i have a client that qualifies for a home loan, as a company, what are the prerequisites of securing a loan for Him/Her?

  2. Gerda Says:

    I would like to know what is wrong with the prices in the Western Cape. If the average price for a medium size home is R979 300.00, how is it that you cannot get a medium size home for less than R1.395.000.00. It seems like the estate agents have a meeting and decide on the price all the houses should be marketed for. It does not appear logical – regardless of the area or the condition the house is in, they are all in the same price tag.

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