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1 March 2012

FNB Property Barometer - February House Price Index
FNB - South Africa
FNB House Price Index growth ticks up mildly again in February, as late-2011 economic growth improvement filters into the market, while “recency bias” may be starting to support lending/borrowing in 2012

OUTLOOK
From the vehicle sales numbers, as well as the FNB Estate Agent Survey, we see that after a brief uptick in year-in-year growth around quarter 3 2011, both year-on-year growth rates receded once more, suggesting that the flurry of faster growth was not a lasting one. We suspect that this will be the same for house price growth, and that the relatively high February rate of 6.6% year-on-year will probably not be sustained for more than a few months.

With our expectation for slower economic growth in 2012 (compared to 2011 as a whole), despite the late-2011 uptick, we would continue to expect slow single-digit house price growth.

However, we have more recently considered the prevalence of the so-called “recency bias” in many people, which means that the more recent past is a bigger influence on their perceptions of risk than events further back in the past. It is possible that recency bias is causing borrowers and lenders alike to become more confident in early-2012, and that this may continue to unfold up until the next interest rate hiking cycle begins.

This is not an entirely rational approach, as periods of low interest rates can often be the higher risk periods as the inevitable interest rate hikes get nearer. However, the reality is that borrowers and lenders alike have this tendency to become more confident the longer interest rates stay low, and the view in the “rear view mirror” is looking better as we are now over 3 years into the interest rate cutting-to-sideways part of the cycle.

As such, we have revised our average house price growth forecast for the entire 2012 slightly upward to 4.2% from a previous rate of 2%. This remains slow, but would be slightly faster than the 3.2% recorded in 2011.
FNB Property Barometer_February 2012 House Price Index

January Mortgage Advances
ABSA - South Africa
Mortgage advances growth remains low in early 2012
January 2012 saw growth of 6,1% year-on-year (y/y) in the value of outstanding credit balances in the South African household sector, to a level of R1 186,2 billion.  On a monthly basis household credit was up by R8,7 billion, or 0,7%, in January from December.

The value of outstanding private sector mortgage balances at monetary institutions, which includes both commercial and residential mortgage loans, increased by 2,4% In January (2,5% in December 2011). The value of total mortgage balances outstanding was unchanged in January from December last year.

In the household sector the value of outstanding mortgage balances was up by 1,6% y/y in January to an amount of R773,5 billion, which came to a share of 65,2% of total household credit balances. Month-on-month growth of R1,1 billion, or 0,1%, was recorded in household mortgage balances in January compared with December.

Real economic growth of 2,8% is expected in 2012 (3,1 % in 2011), consumer price inflation is set to remain above 6% throughout the year, interest rates are to remain stable until late this year, real household disposable income is projected to grow at a slower pace than in 2011, the household debt-to-income ratio is forecast to remain around 75% and many consumers are still struggling with impaired credit records. In view of these expectations the residential property market is forecast to continue to show some subdued growth in 2012, with mortgage advances growth projected to remain well in single digits up the end of the year.
Mortgage Advances Jan 12

Warning to Cape property developers - 'avoid the high-walled Johannesburg look'
Anne Porter Knight Frank - South Africa
Cape Town's leafy suburbs, often described as the most attractive of any major city in South Africa, are under threat, says Lanice Steward, MD of the Cape Peninsula estate agency, Anne Porter Knight Frank.

"The danger that they face," said Steward, "can be seen if you drive around any of Johannesburg's traditional Sandton/Rivonia/Bryanston precincts. The formerly gracious, attractive homes in semi-rural areas on one or two acres have throughout the northern suburbs given way to a series of high-walled electric fenced security villages, most of which seem to be as heavily guarded and protected as Fort Knox."

"This may be necessary from a security viewpoint - no doubt it is - but aesthetically these ultra-secure estates are a disaster. There is nothing welcoming or attractive about them."

Typically, said Steward, a Johannesburg security estate will have two major drawbacks: it will be overbuilt, the houses within it being too large for the erven on which they stand and it will be "dandified" with marble, granite, sandstone and other decorations which, while testifying to the wealth of the occupants, would look very inappropriate in the Cape Peninsula.

Certain Cape Peninsula security villages, said Steward, have already succumbed to the "Jo'burg" syndrome, the houses being packed in cheek by jowl and the public open space almost negligible. Such schemes, she said, have suffered from a lack of restrictions on the building size in relation to the plots.

"It would," said Steward, "be a great pity if such traditionally beautiful areas as Constantia, Tokai and Rondebosch went the "Johannesburg route". I believe it is still possible to protect much-loved areas without destroying the rural, peaceful ambience that made those precincts so appealing originally."

More banks cut ties with Auction Alliance
Moneyweb - South Africa
Absa and Nedbank join the bandwagon.
Absa and Nedbank have ceased trade with Auction Alliance pending the outcome of investigations into claims of staff receiving kickbacks for preferential treatment, according to a report on Thursday.

The Cape Times reported that Nedbank forensic investigators had interrogated a contracted employee on Wednesday after he was supposedly implicated in the receipt of payments from the auction house.

"During the course of the day, our interrogations have progressed to such a stage that we have informed Auction Alliance that we will not refer any new cases to them until we have concluded our investigation," Nedbank's head of risk Philip Wessels told the newspaper.
Moneyweb.co.za

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