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The SoCR states that there is a very high demand in the gap-housing market segment,
but supply of housing is not matched to the affordability of the market because there
is a shortage of affordable housing – those areas or properties with values under
R500 000 – which are often perceived as weak, stagnant and risky.

However, a very different reality appears when key market indicators of affordable
housing markets are isolated and compared to overall markets. The results from SoCR
present an investment opportunity for the private sector.

When affordable property markets in the Western Cape are compared to overall
markets, the SoCR concludes that:
• Affordable markets are growing faster than markets overall.
• Many markets considered affordable by average values are not affordable when
local incomes are used to measure housing affordability.
• Equity can be used to close the housing gap and boost the purchasing power of
homeowners in affordable markets.

Households in the Western Cape faced increased financial strain during 2015 and there
is evidence that affordability stress is rising in the province. The South African Reserve
Bank (SARB) data released for 2016Q1 show household debt-to-income ratio at almost
80%. This is very high, and will increase if fuel and electricity prices increase.

House Prices in the Western Cape
The FNB Western Cape House Price Index shown in Figure 33 below confirms that the
Western Cape economy continued to outperform the national economy in 2016Q2.
The Western Cape recorded the fastest average house price growth between 2013Q2
and 2016Q2, shown by the broadening of the housing price gap between the Western PROVINCIAL OUTLOOK NATIONAL OUTLOOK GLOBAL OUTLOOK GAP HOUSING INVESTOR NARRATIVE SPOT THE OPPORTUNITY PORTFOLIO INSIGHTS KHULISA NEWSLETTER ELECTRIC VEHICLES ENERGY SECURITY LOOKING AT GDP
Cape and other provinces.

During the same period, the property outlook for the Western Cape shows that a house
price was on average R1.353 million – making it, on average, the province with the most
expensive homes. The FNB Western Cape House Price Index suggests that this house
price inflation has inevitably contributed to the deterioration in affordability of housing
in the province.

QUARTERLY ECONOMIC BULLETIN 2016 69