The Cape Metro is estimated to have one of the highest average price levels of the 6 major metros, but is not believed to be the most un-affordable on a per property basis. The latest FNB Barometer finds that with an average estimated price of R894,092 for 2008, the metro is cheaper per property than Joburg metro (with an estimated average R1,040,958 in 2008). Comparing affordability by the average house price/average household income measure, the Cape metro’s ratio was 5.18 for 2008, which is slightly more affordable than Joburg (5.57), eThekwini(5.38) and Ekurhuleni (5.28) metros, with eThekwini (R812,566) and Ekurhuleni (R747,428) having a lower average price than the Cape metro but also having significantly lower per household income. On a per square metre basis, however, the Cape Metro is probably still the priciest, as we find that average stand and building size in this metro is generally smaller than the likes of Joburg, reflective of a greater land scarcity over many years.

Interpretation/Conclusion

The key Cape Metro numbers point to ongoing weakness in demand, coupled with widespread financial stress causing a property oversupply on its market and resultant price deflation. The agents in the survey believe that demand remains weak, and financial stress remains widespread.

Globalinsight estimates a sizeable slowdown in the annual real economic growth number for the Cape Metro, from 5.5% in 2007 to 3.3% in 2008, and the figure was probably far lower by late-2008 and early-2009 if the national numbers are anything to go by.

Real disposable income growth has been even harder hit, coming down from 5.6% in the previous

year to 2.4% in 2008, with last year’s inflation surge playing a key negative role on top of weakening

economic and employment growth.

While the banking sector has been heavily criticized for its conservative lending practices, it is difficult to

ignore the fact that this weak economic situation is eroding the household sector’s ability to service a

debt burden as large as that of recent years.

Looking at house price trends in the Cape Town metro, they appear to reflect the widespread

financial stress. However, in the Cape Town/Fishoek/Simonstown region, i.e. the towns in close proximity to the mountain area, the average price appears to be holding up better than in the Northern areas, a possible indication of the greater financial health of higher income groups, but also a reflection of land scarcity created by the city’s topography.