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19 April 2012

1st Quarter 2012 Segment House Price Review
FNB - South Africa
Concluding remarks
In 2011, it would appear that housing affordability made little further improvement, with interest rates moving sideways, house price growth accelerating mildly, and average employee remuneration growing slower than in 2009/10.

There still exists very significant financial pressure on households, as indicated by the FNB Estate Agent Survey, where the sample of agents estimates that 20% of home sellers are selling in order to downscale due to financial pressure.

Financial pressure, coupled to a lack of further housing affordability improvement, we believe, has created an “affordability” or “value for money search” which has been visible in recent segment trends. The Full Title segment has outperformed the Sectional Title segment, because when one compares “like for like” (i.e. 3 bedroom full title with 3 sectional title, 2 bedroom with 2 bedroom etc), the Full Title segment has until recently been more affordable, with the sectional title segment having perhaps “overshot the mark” back in the boom years. However, this is changing due to higher price growth in the area of full title property, and as a result we may begin to see a narrowing of the average house price growth rates between the Full Title and Sectional Title segments in the not too distant future.

When homes are segmented by size, we see smaller-sized homes outperforming, also a sign of the affordability drive taking place. This “affordability drive” is expected to continue for the foreseeable future as many households continue to repair their somewhat fragile balance sheets, new entrants especially from previously disadvantaged communities attempt to get onto the housing ladder, and many attempt to adapt to a rapidly changing environment in terms of rising municipal and utilities bills related to housing.
FNB Property Barometer_Segment Price Review _ Q1 2012

Property Barometer - 1st Quarter Provincial House Prices
FNB - South Africa
Provincial house price growth acceleration widespread
We have recently been reporting accelerating national house price growth, with the year-on-year FNB House Price Index inflation rate having reached 8% by March 2012.

A look at price trends by major regions of the country indicates that this acceleration in house price growth is widespread. The largest regional property market, Gauteng, has seen its price growth accelerating for 4 consecutive quarters to 6.8% year-on-year as at the 1st quarter”, and although not yet the top performing province price growth-wise, the FNB Estate Agent Survey shows Gauteng agents surveyed to be the most upbeat of all the major metro regions regarding their perceptions of residential market strength.

However, despite recent improvements in Gauteng agent optimism, as at the 1st quarter of 2012 it was still the Western Cape average house price growth that was leading the way of the major regions, with a year-on-year increase of 8.2%.

The two major regions that currently take a different direction to the national trend are KwaZulu-Natal and the Eastern Cape. These two strongly manufacturing-driven economies often appear to lag the trend of the two more services driven economies of Gauteng and the Western Cape by a few quarters. And so, whereas Gauteng and the Western Cape have been on a recently accelerating price growth path, these two major coastal regions have seen their house price growth slowing a little in recent quarters, with the Eastern Cape measuring 5.8% growth in the 1st quarter and KZN 4.5%.
Property Barometer_Provincial House Prices_Q1_2012_Apr 2012

Outcome of a high-level meeting between the Competition Commission and the LSSA regarding an exemption application decision by the Competition Commission
Law Society - South Africa
The Competition Commission (“Commission”) and council members of the Law Society of South Africa (“LSSA”) met on 2 April 2012 to discuss the implications of the Commission’s refusal to grant the LSSA an exemption for the professional Rules of the statutory provincial law societies. Both parties agreed and committed themselves – as far as possible – to resolving all matters concerning the professional Rules governing the attorneys’ profession in a manner that will ensure the continued professionalism and integrity of the profession while addressing competition law concerns raised by the Commission.
LSSA Press Release

Absa House Price Indices - March 2012
Absa - South Africa
Home values in a state of deflation
Latest trends
The average value of homes in the South African residential property market for which Absa received and approved applications for mortgage finance, is deflating. This is based on the bank’s house price indices for the small, medium-sized and large categories in the middle segment of the market (see explanatory notes).

Nominal year-on-year price deflation was recorded in all three the abovementioned segments of the housing market in March 2012, with values starting to decline on a monthly basis at various stages during the course of last year. In real terms, i.e. after adjustment for the effect of inflation, home values continued to deflate up to February this year, based on headline consumer price inflation of 6,1% year-on-year (y/y) in the month.

Average nominal price levels of houses in the various categories of the middle segment of the market were as follows in March 2012, with nominal and real price changes presented in the table and graph on the next page:

  • Small homes (80m²-141m²): R620 700
  • Medium-sized homes (141m²-220 m²): R961 600
  • Large homes (221m²-400m²): R1 476 000

Absa HPI_no52 _Mar 12

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