Understanding property barometers and prices

Should I buy, should I sell?

With so much written about the economy and property market, it is easy to be confused.

Seeff provides some insight into property barometers and prices:

The property market and understanding the various factors that influence the market and prices can be daunting for a seller or buyer, especially with so much being written about the economy and market right now.

There are a number of market commentators that issue media statements from time to time in the form of barometers that point to the performance of the market and price growth, often indicating differing levels of activity and price growth trends.

It is important to note that there are regional, area and suburban differences – while some continue to see good price growth, others are seeing little to none.

There are two main property barometers that are issued periodically by FNB and ABSA banks. Other banks such as Standard Bank along with Ooba, Lightstone (a data bank of all deeds office registrations in the country) and other economists and analysts also bring out opinion pieces on the market and prices from time to time.

It is important to note that these use different data sources and represent market averages which are often skewed as they tend to lump price bands together without separating out the different areas.

There are also cyclical factors that come into play in certain areas. Some quarters are traditionally slower in terms of sales volumes while the following quarter could be higher; thus comparing the two would provide a skewed view of any decline or growth trend. These could become even more pronounced in certain areas.

The barometers also differ on how they report on property prices. There are essentially two key indicators, being nominal price growth versus real price growth. The difference is that the ‘real’ price growth is adjusted for inflation and is thus the growth net of inflation for the period. By way of example: if the nominal price growth is standing at 7% and inflation (or CPI as sometimes referred to) stands at 6%, then the real price growth would be just 1%.

Importantly, these barometers are an industry guideline and not necessarily applicable to your property or area. It is therefore best to consult a local area expert for a more accurate assessment of prevailing local market conditions and price growth trends.