Residential property prices are forecast to grow at 7.2% this year, on the back of 6.72% growth in 2014.

Property specialised risk management company Lightstone Property analytics director Paul-Roux de Kock this week provided an overview of the South African property industry.

He noted, however, that while the optimistic view estimated price growth of 7.2%, the more  “realistic” estimate would be 5.8% price growth for this year.

“[The] increased need for security[in the face of worsening] crime [levels], as well as aggravating factors such as labour unrest, would pose the biggest threat to the property market, as those factors reduce the purchasing power of buyers and bank risk appetite in the low- and mid-value markets,” he said.

De Kock noted that the value of price growth, in 2014, had been the highest since the subprime mortgage crisis in 2008.

The significant demand for additional formal housing in South Africa had driven the strong price growth in the lower- to middle-segment markets.

Growing demand in the lower-value markets would have a longer-term positive impact on the luxury lifestyle estates, De Kock noted, adding that South Africans wanted to increase their net worth and, ultimately, “afford that dream home that offered all the benefits associated with success.”

“If the country succeeded in growing large numbers of people into a financial position to afford formal housing, as well as developing a wealth-building group to drive the higher-value markets, the local property market should be in good shape in the long run,” he stated.

De Kock expected the established luxury estate property market price growth to continue to be determined by localised factors, such as immediacy to major business centres and schools, road access, security and aesthetic appeal.

He estimated that about 318 000 residential properties were found in secure, gated communities, with a total value of about R643-billion, at an average of R2-million per property.

This was almost three times the national average of R700 000 per home.

Further, more than 50% of these properties were in Gauteng and 25% in the Western Cape.

Meanwhile, he stressed that he was “cautiously optimistic” about the South African property market in 2015 owing to the encouraging banking activity.

About 60% of property transactions were bonded in the higher-value markets, and over 85% of bonds were granted for primary loans.

Newly registered bond values grew in the second and third quarters of last year to the highest since the 2008 financial crisis.

Standard Bank recorded financing of more than R9.5-billion, First National Bank provided more than R8-billion and Absa provided more than R7-billion.

Further, he stated that, while developments around the restriction of foreign land ownership were unlikely to have a significant direct impact on the residential property market, it could spark a sell-off by South African investors in markets influenced by foreign buyers in expectation of further restrictions.