South Africa's coastal property market continues its exceptional performance - a trend that has seen price levels in these areas surpass those in the metropolitan areas, says Jacques du Toit, Absa Group senior economist.

Four of South Africa's nine provinces border the country's 2 968 kilometres coastline. These are the Northern Cape, the Western Cape, the Eastern Cape and KwaZulu-Natal. With the exception of the Northern Cape, all these provinces are deemed to have well-established coastal property markets.

Du Toit notes that the boom in the coastal property market, has since 2000, been driven by factors including real economic growth, fiscal policy measures, access to mortgage finance, investment demand, household wealth, location and sporting activities.

However, he points out that there are other wide ranging supporting factors that have contributed to the significant rise in the domestic coastal property market in the past seven and half years.

"Apart from favourable economic and socio-economic factors having supported the market for coastal property, the limited supply of sea-view houses, flats and vacant stands, with demand continuing to rise at a brisk pace, have caused prices to escalate significantly,"

Types of coastal property include single-stand houses, flats and apartment blocks, lifestyle estates and vacant land for residential development purposes on the beachfront or with sea views.

Du Toit notes the following recent house prices trends:

• The average price of affordable housing increased by a nominal 21,1% year-on-year in the third quarter of 2007.
• Nominal year-on-year price growth of 14,7% was recorded in middle-segment housing in the third quarter of the year, causing the average price of a house in this market segment to increase to about R944 000. In real terms, house price growth was 7,3% year-on-year in the third quarter.
• In the third quarter of 2007, house prices in the luxury segment of the market increased by a nominal 8,8% year-on-year and a real 1,8% year-on-year.

But Du Toit predicts a decline in nominal house price growth for next year (2008).

"Nominal price growth of just below 10% is projected for 2008, taking into account the tighter monetary policy conditions, a slower pace of economic expansion. Lower growth in real household disposable income and the effect of the National Credit Act."

Courtesy Jacques du Toit Senior Economist ABSA Bank

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