Cape Town Hit by Housing Price Deflation

In these pages, we've discussed housing price deflation in Canada, the U.S., Australia, Qatar and other parts of the globe.

Add Cape Town, South Africa to the list.

The average housing price decline of 5.1% year on year in Q1 represents a big change from three years ago.

Here are details from a June 11 article in The Citizen:

Deflation in house prices in the Mother City -- previously only really seen along the Atlantic Seaboard -- has spilled over to other regions near Table Mountain. The latest Cape Town Sub-Regional House Price data from FNB shows that price growth turned negative in the City Bowl, Southern Suburbs and Eastern Suburbs (such as Salt River and Woodstock), along with the Atlantic Seaboard, in the first quarter of 2019.

The latter -- which stretches from Green Point through Sea Point, Clifton and Camps Bay to Hout Bay -- led the price declines in the metro, first slipping into contraction (-0.08% year on year) in the third quarter of 2018.

On average, prices in the area declined by 5.1% year on year in the first quarter, the worst performance to date. The plunge from the multi-year high growth rate of 25.5% in the first quarter of 2016 has been rapid. Factor in inflation (>4%) and the real decline in these suburbs is approaching double figures.

South Africa's biggest property portal, Property24, shows that the number of properties on the market (as listed on the site) in Camps Bay, for example, spiked to 477 in April, from levels of just over 400 earlier this year. The picture in Sea Point is similar, with a jump from 698 listings in January to 838 in April.

FNB economist Siphamandla Mkhwanazi says prices are "softening... across virtually all sub-regions, with the upmarket sub-regions in and around the Cape Peninsula being the hardest hit". On average, house prices contracted by 4.2% in the Eastern Suburbs, 2.4% in the Southern Suburbs, and 2% in the City Bowl. The drop in the Eastern Suburbs is especially pronounced. Only the Atlantic Seaboard and City Bowl were previously in decline. (Editor's note: The chart below is also from The Citizen article):

Capetown Housing Deflation Chart

Relatedly, when Q1 concluded, the April Elliott Wave Financial Forecast offered observations about the housing market of a much bigger nation: China.

The Chinese housing market is a picture postcard of overstimulation. According to a recent study by Southwestern University of Finance in Chengdu, 65 million Chinese homes sit empty, a total that equals one-fifth of China's entire urban housing stock. The rise in new home prices fell to 0.53% in February, and major developers recently announced that they will slash home prices 10% and office prices by 20% to "stimulate sales."

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