Cheap houses a hot investment

Robert Laing

Robert Laing

Affordable house are fast becoming unaffordable. Homes in areas where the average property costs less than R250000 increased in value by 42,6percent over the past year.

This is more than double the average South African house price growth of 18,8percent from March last year to the same month this year, Lightstone Residential Property Indices data showed.

While national house price inflation peaked at 32,5percent in 2004 and has been gradually slowing, affordable house prices only hit their stride last year when they grew by 49percent.

"While banks may have originally been pressured into the affordable end of the market by agreements with the minister of housing, participation in this market would now seem to increasingly make business sense," commented First National Bank property strategist John Loos, who is also the economist behind the Lightstone indices.

Increases in average house prices became smaller higher up the price scale, with those in the luxury bracket (R1,5million and up) recording the most modest growth of 10,7percent.

"In the near term, it would appear that the lower end has a lot going for it," said Loos.