The causes behind high house prices

House prices in the property market are influenced by different factors. These are the major factors at play.

The high housing cost makes it increasingly difficult for first-time buyers to enter the property market. While rising house prices are good for investors, it can make it challenging for the average consumer to enter the property market. Understanding the underlying causes of house price appreciation can help buyers better navigate the home-buying journey.

“Property prices increase every year – which is what makes it such a great long-term investment strategy, but it can make it challenging for first-time buyers to enter the market,” notes Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

To dispel some common misconceptions held among buyers, RE/MAX of Southern Africa expounds on some of the myths and truths surrounding rising house prices.


The common misconception is that developers cause house prices to increase by building new housing in a suburb that attracts a wave of new buyers. The truth is that developers often only come to a suburb because they are drawn to its profitability. This means that house prices in the suburb were probably already on the rise (or well on its way towards it), which is what made the area attractive to developers. Rather than being the cause of rising house prices, developers are the by-product of it and can act as the outward confirmation that demand for the area is on the rise.

Short-term rentals

Platforms that allow short-term holiday rentals can partly be to blame for high rental prices. Because homeowners are choosing to offer the property for short-term letting all year round, fewer homes are available for long-term letting. This leads to a decrease in supply, which then causes prices to increase.

Demand vs supply

The main culprit behind both causes outlined above is demand and supply. When demand for housing outstrips supply, prices automatically increase. Even when new developments appear, the available stock seldom fully satisfies the demand. It is useful to keep in mind that not only first-time buyers are looking to snatch up affordable homes. Real estate investors and share portfolios are also on the market for their next investment and often like to purchase within new developments.

“Barring some sort of economic crash, property prices will inevitably continue to increase over time. That’s why I always recommend that the sooner you can enter the property market, the better. Rent also increases every year, which means it will become increasingly difficult to find the spare cash to keep saving up for your first home,” Goslett notes.

For consumers to give themselves a better chance of entering the housing market, Goslett recommends building a good working relationship with a local real estate practitioner as soon as possible.

“As experts in the industry, property practitioners can share some much-needed guidance on where to find entry-level homes and what buyers need to be saving towards. They can also put them in touch with a bond originator to help them find out what they can truly afford. It is never too early to chat to a RE/MAX property practitioner for some free advice that could potentially help buyers enter the property market sooner than expected,” Goslett concludes.

Writer: Kayla Ferguson

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