Shedding light on housing statistics - by Keith Wakefield

There is a lot of negative sentiment at the moment about house prices fuelled by information that is often out of context or misinterpreted.

Simply put the average house price is that of the majority of properties changing hands. Reports that the average house price has come down means that a greater number of cheaper properties are being sold. The reverse is also true. So when the average house price rises it means a greater number of more expensive properties are changing hands.

It should also be understood that the data used by banks to produce house price indices is sourced from the number and value of mortgages being processed by the institution, and this does lead to differences in reporting these prices.

Standard Bank points out that measuring house prices is complicated because data usually comes from the properties sold during a period rather than a well-designed representative sample of houses sold.

Standard Bank’s average house is currently priced at R520 000 and it states 50% of the houses country-wide are priced at more than this and 50% at less.

Another aspect to understand is the difference between actual house prices and house price growth, which has been reported as dropping for some months.

ABSA bases its sample on houses it has mortgaged between 80 and 400 square metres priced up to R2, 7 million. If one had bought this middle segment house in December 2006 when it was reported that nominal house price growth had declined to 13, 5% you would have paid R857 400.

In May this average house price was reported at R960 000, when house price growth had dropped to a nominal 4, 3% in the middle segment of the market.

So, despite declining house price growth this average house has, in 15 months, still increased in price by almost R100 000. This may sound ridiculous but I use this as an example to show that a lot of panic is being created unnecessarily

I need to emphasise that property is a long-term investment. You cannot buy one month and expect to sell for thousands more the next. The stories one hears of speculators buying and selling a property for huge profits in the space of a few months were indicative of the abnormal market conditions of 2002 to 2005.

If you have owned your property for some years, and kept it in good condition, you are more likely to sell it for more than you bought and have enough to upgrade.

Ultimately market value of property is determined by what a willing buyer is prepared to pay. Therefore it would be better to rely on a comparative market analysis of similar property in your area than be unduly influenced by figures that are of a very general nature.


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