Standard Bank’s new house price indices explained

Standard Bank, the largest home loan provider in South Africa, has recently unveiled two new house price indices aimed at offering valuable insights into regional and provincial market trends across the country. The decision to introduce these indices was primarily driven by the recognition of the diverse drivers of demand in different regions of South Africa. Siphamandla Mkhwanazi, Consumer Economist at Standard Bank, shared the rationale behind this move during a recent interview with CNBC Africa. Mkhwanazi highlighted the significant disparities in the drivers of housing demand between provinces, attributing these differences to varying levels of economic activity and social inequalities in different regions. While discussing the early findings from the indices, he pointed out unexpected trends such as the struggling house prices in KwaZulu-Natal compared to the flourishing market in the Western Cape, despite both provinces being located along the coast. One of the standout observations from the data was the dominance of the affluent buyer segment in the Western Cape, with cash transactions surpassing mortgage transactions, indicating a preference for high-end properties in the region. On the other end of the spectrum, Mkhwanazi highlighted the strong performance of Tshwane in driving house price growth, particularly propelled by demand from first-time buyers and the ease of commuting to major employment hubs like Johannesburg. Although the focus of the house price indices was primarily on the major provinces, Mkhwanazi acknowledged the underlying demand in regions like Mpumalanga while citing challenges in generating stable indices due to low transaction volumes. He also touched upon the impact of foreign buyers, noting a decline in their influence on the market, particularly in Cape Town, where prices have moderated after a period of excessive trading. One of the key distinctions of Standard Bank's indices is the use of median prices instead of averages, as Mkhwanazi explained that medians offer a more balanced representation of the market by avoiding distortions caused by outliers. By focusing on the middle price point, the indices aim to provide a clearer picture of housing dynamics across different price segments. In conclusion, Standard Bank's new house price indices offer a comprehensive view of South Africa's dynamic housing market, shedding light on the nuanced regional trends that shape the industry. The indices not only provide valuable insights for potential homebuyers and investors but also serve as a reliable tool for policymakers and analysts monitoring the health of the property sector.