House Prices, GDP and Civil Cases for Debt, 2007 - 2011

The graphs below show time-series data collected as part of an analysis of the anatomy and impact of the global financial crisis on Gauteng.

In the top graphs the user is able to view values for three indicators, with data segmented for each municipality and for each of the years from 2006 to 2011 (Note: GVA data is only up to 2010). The provincial averages for each variable are shown as ‘Gauteng’. The three variables shown are: Average House Prices; Gross Value Add (used here as a proxy for Gross Domestic Product); and Civil Cases for Debt.

A multivariate comparison of these variables across the municipalities is not possible because of the difference in the units of measurement as well as differences in the spatial demarcations of the areas considered. For example Average House Prices are measured in Rand value, while Civil Cases for Debt are just numbers. On the other hand Average House Prices are classified per area rather than by municipality, and GVA data is given by municipality. Civil cases for debt are classified by area served by a particular Magistrates Court. As a result each variable can only be viewed separately from the others.

The graph below reflects year-on-year percentage changes in GVA and Civil Cases for Debt over the period 2006 – 2011 (2006 – 2010 for GVA). It also reflects on the Annual House Price Inflation for the period 2006 - 2011.

Data on Average House Prices and Annual House Price Inflation is taken from Lightstone Property publication on Residential Property Indices and GVA data is taken from Quantec. Data on Civil Cases for Debt is available from Stats SA.

Analysis of trends

The two graphs show certain trends in the data which may be used to make inferences about the impact of the global financial and economic crisis in Gauteng.

Annual Average House Price, Annual House Price Inflation[1]

Prior to the crisis which struck in 2008/2009, the Annual House Price Inflation was very high for all the recorded areas, painting a positive picture. Annual increases began to decline in 2007 and 2008, when a combination of high general inflation, high interest rates and tightening credit regulations began to impact the property market. But with the onset of the global crisis house-price inflation turned negative for all of Gauteng except Ekurhuleni. (The provincial average was -3%). The crisis was a period of reduced demand and this affected the demand for housing property, with most areas actually experiencing a drop in the prices of housing property. This is clear when one looks at the graph for Annual Average House Prices (Amounts). In 2009 prices dropped for all the areas save for the East Rand and this is confirmed by the negative House Price Inflation recorded in 2009 for other areas (Jhb -3.7%, Tshwane -4.4%) save Ekurhuleni (at 0.2%). Ekurhuleni occupies the greater part of the East Rand.

Civil cases for debt

The number of civil cases for debt is quite low and relatively constant over the period 2006 and 2011 for the West Rand, East Rand and the Vaal area (most likely due to low populations compared to other areas). Cases were highest and increasing in Johannesburg, particularly after 2008 (increasing by 18.6% in 2009). In Pretoria there were fairly constant but show a marked decrease in 2011 (-25.1%) probably reflecting improved economic circumstances.

Gross Value Add per municipality

A comparative analysis of Gross Value Add (GVA) (constant 2005 prices) shows that it is highest in the City of Johannesburg (5 year average of R212 billion), followed by Tshwane (5 year average of R140b) and Ekurhuleni (R138b). On the main these are areas of high economic activity compared to the West Rand and Sedibeng. Metsweding has the lowest GVA (with a 5 year average of only R7b) and this follows from it being a predominately rural province (Note: this municipality has since been merged with Tshwane). For all municipalities except Tshwane the greatest impact of the financial crisis was felt in 2009 when there were significant reductions in GVA. Measured in percentage change terms, the greatest reductions in GVA were recorded in Sedibeng (-7,6%) followed by Metsweding (-4.2%), and the West Rand and Ekurhuleni both with -4.1%. The City of Johannesburg experienced the least reduction (-1.5%) while Tshwane actually reflect a sustained increase over the crisis period (with a 4 year average of 3.6%). The overall average change for the province does not reflect as gloomy a picture as might be expected, but 2009 stands out as having been really a bad year in which the provincial economy was hit the hardest by the global financial crisis and GVA dropped by -1.6%.

Conclusion

The graphs show a clear connection between the global financial crisis and changing economic fortunes of Gauteng over the last half decade. Indicators suggest that circumstances were worst at the height of the crisis and improved as the crisis eased.


[1] Lightstone Annual House Price Inflation Index is calculated using a Repeat Sales Methodology which provides a measure of the actual price inflation of houses that have transacted twice within a particular period of time. This methodology this contrasts with Average House Price Indices. It is considered a premier methodology for indexing house prices internationally. For further inquiries, please contact info@lightstone.co.za.


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