House price appreciation is often termed house price inflation and is essentially the rate at which a property increases in value.
Appreciation means increase, escalation, growth, and even inflation which can be confusing as one thinks of the word inflation, as negative but in fact, inflation means increase.
Why is it important to understand the term?
Before buying a property and therefore making an investment, it is important to identify what the current appreciation rate is in the market to limit any high expectations you may have of what kind of return you hope to enjoy on your investment in the immediate future.
The National annual house price inflation rate is key when considering buying a property as it provides insight into what the property or properties may cost you in a year should you prefer to delay purchasing a property.
The house price inflation rate also provides Landlords some guidance as to what a fair rental escalation will be in a year, especially crucial when preparing lease agreements.
It must be remembered though that house price inflation varies from Province to Province, from area to area, and that the National house price inflation rate is based on an average rate for all areas in South Africa. The National house price inflation however provides a good benchmark overall.
Buyers wanting to ensure they buy a property that will provide a good return on Investment, need to ensure that the area that they are buying in, has consistent growth and regularly surpasses consumer inflation.
Likewise, sellers would probably want to wait for a change in the market if the housing price inflation rate for their area is below consumer inflation.
How do I find out what the house price inflation rate is, in my area?
Several property data companies such as Lightstone and TPN, offer a wide range of property information for a fee.
However, the data relative to the area you want to invest in may not be available. In this scenario, it is best to speak to your local real estate company which should be able to provide you with the growth rates and trends in your area.