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22 October 2009

FNB Vacant Land Price Index
FNB - South Africa
Conclusion
The mild rise in the FNB Vacant Land Price Index could point towards greater interest in building new properties in future. However, it is also possible that greater interest in vacant land is in many instances with a longer term view in mind to building, and that the mild uptick in the vacant land market is merely a catch-up as some early-birds take advantage of basement prices, because this market segment has been suppressed for a considerably longer period than the overall residential market. With a household sector still under severe financial pressure, and many bargains to be had in the existing housing market still, it remains unlikely that we will see a noticeable improvement in building completions until well into 2010.
FNB Vacant Land Price Index

FNB Residential Property Barometer - Nelson Mandela Bay
FNB - South Africa
Interpretation/Conclusion
Although not expected to be a strong recovery, the 3rd quarter Barometer points to significantly stronger situation in the Nelson Mandela Bay residential market, following a period in which demand activity battled to improve. The 3rd quarter jump in demand was significant, while another key indicator, that being the percentage of sellers achieving their asking price, has also improved significantly. Deeds data runs a bit behind, but while area slight price deflation on month-on-month basis was still apparent in the 2nd quarter, it is believed that this will turn for the better in the coming quarters' data, once demand catches up with the apparent oversupply of recent times.

To date, the demand improvement is largely the result of interest rate cuts, and banks' response to better market conditions by relaxing lending criteria has reinforced the trend. In the near term, though, the economy is expected to provide more support for the market as we emerge from recession.

In 2008, the Mandela Bay real economic growth rate was believed to have slumped from 4.5% in 2007 to 2.1%, exerting huge pressure on real disposable income growth, which slowed from 5.3% in 2007 to 2.3% last year. In all likelihood Mandela Bay has been in a recession during the first half of 2009, but the signs are that both the global economy and our own national economy are beginning to strengthen, good news for what can be a very cyclical Mandela Bay economy and property market.
FNB Residential Property Barometer - Nelson Mandela Bay

FNB Residential Property Barometer - eThwekini
FNB - South Africa
Interpretation/Conclusion
Although not expected to be a strong recovery, the 3rd quarter Barometer points to significantly stronger situation in the eThekwini Metro residential market compared to a very low activity rating last year. This metro appears to be more sensitive to economic and interest rate cycles than some of the others, perhaps due in part to its dependence on the highly-cyclical manufacturing sector. Therefore, from a situation in the 2nd quarter of last year, where at one stage the metro's agents surveyed were the least optimistic in the country, the situation has steadily turned to a state where they are now seemingly the most upbeat (albeit very close to other coastal metro agents).

The 3rd quarter jump in demand was significant, while other key indicators such as average time on the market and percentage of sellers achieving their asking price also look like starting to improve. Deeds data runs a bit behind, and still shows widespread price deflation as at the 2nd quarter, but this is expected to change for the better in the numbers for the 2nd half of 2009, tracking the national trend back towards price inflation.

To date, the market improvement is largely the result of interest rate cuts, and banks' responses to better market conditions by relaxing lending criteria has re-inforced the trend. In the near term, though, the economy is expected to provide more support for the market as we emerge from recession.
FNBeThekweniOct09

South African distressed selling an example to global markets
Auction Alliance - South Africa
The South African distressed property market is waning and forced sales have dropped considerably in the third quarter, reports Alliance Group Chief Executive, Rael Levitt.

The South African distressed property market is waning and forced sales have dropped considerably in the third quarter, reports Alliance Group Chief Executive, Rael Levitt. "In comparison to US and UK distressed property indices, our property repossession levels are a picnic," says Levitt who has just returned from abroad where he met several banks and foreclosure auctioneers. The Alliance Group Distressed Asset Index, which tracks local mortgage stress, reported that arrears on mortgage bonds increased from 55,000 in the second quarter of 2008 to 140,000 in the second quarter of 2009. "We've noticed a marked drop in forced sales in the third quarter. Lower interest rates and banks assisting defaulting debtors are having a positive impact." Alliance reports that its distressed selling peaked in February this year when it put over a 1000 homes under the hammer. "Our inventory levels have fallen by over 40% since then," reports Levitt.
Auction Alliance
 

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