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29 September 2011

Absa - July 2011 Residential Building Stats
Absa - South Africa
Short-term momentum in residential building activity appears to be waning

Based on data released by Statistics South Africa, activity with regard to the planning of new housing improved markedly in the first seven months of 2011, with all three segments of the market showing positive year-on-year growth compared with the same period last year. The construction of new housing was also up in the period January to July this year, but the pace of improvement was significantly slower compared with that of the planning phase. However, the momentum in overall residential building activity appears to have tapered off over the past three months.
 
Year-on-year growth in the volume of new housing units for which building plans were approved from January to July this year was largely driven by the categories for smaller-sized houses and higher-density flats and townhouses. However, the total number of housing units for which plans were approved was marginally down by 0,2% to 6 139 in July from 6 156 in June.
 
In the first seven months of 2011 the number of new housing units constructed was up by only 3,3% year-on-year (y/y). The relatively low year-on-year growth recorded in new housing construction over this period was mainly driven by the higher-density segment of flats and townhouses, which showed a contraction of 12,3% y/y, whereas the number of smaller-sized houses built was up by 13,6% y/y. A total of 3 713 new housing units were constructed in July this year compared with 3 506 units built in the preceding month.
Building stats _Jul11_

How margins get squeezed 
Cape Business News - South Africa
THE profit margins of both developers and contractors have been squeezed in order to bring new developments to the market during the economic downturn, says Colin Green, a director of Cape Town’s Rabie Property Group.

Green says residential developments have been particularly hard hit following the downturn in the property market that most industry players started experiencing towards the second half of 2007. “The gap between the price of existing and new stock remains high while the introduction of the National Credit Act, together with the tightening of the banks’ lending criteria, have made it difficult for many would-be buyers to access finance.”

Green says that while the price of materials has come down since the end of the boom, labour prices have continued to escalate. “There is currently very little building work taking place which has resulted in margins coming under pressure. Some contractors are happy to secure work at cost just to pay their overheads and hope to work smartly in order to make a small profit at the end of the contract.

Current building prices are similar to the tendered rates of several years ago.” Green says many purchasers of new properties are unaware of the various components that make up the selling price of a unit.
Cape Business News

Absa - August 2011 Mortgage Advances
Absa - South Africa
Noticeable slowdown in growth in mortgage advances and total household credit Based on data released by the South African Reserve Bank, growth in credit extended to the domestic household sector came to 5,2% year-on-year (y/y) in August 2011 (6,6% y/y in July).  On a month-on-month basis the amount of household credit was down by R361 million, or a marginal 0,03%, to R1 137,8 billion in August.

 
The abovementioned trends in household credit growth up to August this year were the net result of some components (instalment sales and leasing finance) declining from July to August, while mortgage advances showed only marginal growth from its July level (see below).
 
Mortgage advances (67,4% of household credit) and instalment sales credit (13,4% of the total) are the largest components of household credit, followed by general loans and advances (mainly personal and micro loans) with a share of 11,2% in August. The component of general loans and advances is growing at a pace of well above 30% y/y since the beginning of 2011.  Growth in the value of outstanding private sector mortgage balances at monetary institutions, comprising both commercial and residential mortgage loans, slowed down to only 1,9% y/y in August (2,9% y/y in July). The value of total mortgage balances was R1,3 billion, or 0,1%, higher in August compared with July this year.
Mortgage advances_no41 _Aug11_
 

Where to for the commercial property Industry
Moneyweb - South Africa
....Asks Rodney Luntz.

With the Rand having depreciated, growth in the SA economy predicted to be sharply down and the global economy in turmoil - “Where to now for the commercial property industry?”.

From an industrial perspective everyone in the market was clamouring for a weaker rand and given recent circumstances, commercial property experts are now pondering whether this will be the life line for the industrial property market?

Although a weaker rand will make South Africa’s manufacturers much more competitive, the truth is that the global crisis has dented demand and no matter how weak the rand is or becomes, if demand is down then the industrial sector as a whole will decline. Until the global economy and our own economy begin to recover, the industrial sector is going to remain depressed.

Furthermore according to economists our own growth forecasts have been reduced to 3.2% from 3.7% previously and to 3.6% from 3.9% next year. This growth rate will have very little effect on our employment numbers which again must have a knock on effect on the property market.
Moneyweb

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