South African holiday towns now underperforming metros

Overall, six major metros of South Africa (Tshwane, Joburg, Ekurhuleni, Ethekwini, Nelson Mandela Bay and Cape Town) continue to be perhaps the more “stable” performers through weak economic and housing market periods, according to the First National Bank (FNB) Major Metro House Price Index.

In the fourth quarter of 2016, the FNB Major Metro House Price Index grew by 4.6% year-on-year. While this is far from an impressive growth rate, it has experienced fairly similar growth in the prior few quarters, whereas the more cyclical FNB Holiday Towns House Price Index has tapered to a lower 1.8% year-on-year growth rate.

FNB property analyst John Loos says during a better period back in 2014/15, the Holiday Towns House Price Index growth rate exceeded that of the Metros. “This is customary for this market to outperform metros in good times but underperform in weak economic times. In the tougher times, households cut back on luxuries, and for some this may mean postponing that holiday home purchase. This category of home demand can thus slow more significantly than that of primary residential demand, the latter form of demand dominating the Metros,” Loos says.

“We would therefore expect that the Holiday Town House Price Index should underperform the Major Metro Index in the near term.”


The weakest of the FNB main regional aggregations, however, appears to have been the Mining Town markets in recent times.

FNB Mining Towns House Price Index fell into slight year-on-year deflation in recent quarters, to the tune of -0.4% as at the final quarter of 2016.

This should not come as too much of a surprise, given that the country’s Mining Sector as a whole has experienced severe weakness in recent years, taken weaker by a sharp fall in mining commodity prices starting back around 2011.

South African Mining’s low long term growth performance, even prior to 2011, appears to be reflected in the long term performance of the FNB Mining Town House Price Indices. Since the 1st quarter of 1999, when all of these house price indices commenced, the Major Metro House Price Index has inflated cumulatively by 560.67% up until the end of 2016.

By comparison, the overall Mining Towns House Price Index has inflated by a lesser 437.83%, while the Gold Mining Towns House Price Index has risen by a still lesser 392.22% over the same period.

It would seem that much of the Mining Sector’s long term stagnant growth is reflected in the relative long term performance of mining town housing markets.

This is not to say that mining town markets haven’t had some great periods over the past decade-and-a-half or so. But they appear to have underperformed the big cities, the latter buoyed by their long term urbanization trends and often superior long term economic growth