Residential Property Prices in a Sub-Market of South Africa: Separating Real Growth from Attribute Growth

This paper analyses the South African residential housing market using hedonic price theory. It builds and tests pooled OLS, fixed effects OLS, pseudo-panel and quantile regression models. The main findings are in agreement with most modern related literature. This paper highlights how house price growth rates have been calculated incorrectly due to the changing aggregate house sold every year. It calculates more accurate growth rates for the property market, yielding surprisingly different growth patterns from those originally thought. It illustrates that much of the recent house price growth was caused by attribute inflation rather than pure price inflation. It also shows that most of the pure inflation occurred at the bottom end of the market while most of the attribute inflation occurred at the top end of the market. Furthermore, it shows that house price determinants change across the house price distribution The data used was sourced from the Residential Property Price Ranger and covers 1930 house sales measured half yearly over three years; from 1 September 2004 to 31 August 2007. These sales were recorded in the towns of Stellenbosch, Somerset West, Strand and Gordon’s Bay.

C21, C23, R31

Hedonic pricing, Housing market, Growth rates