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17 May 2012

Property Barometer - Commercial Property Review - Year to date
FNB - South Africa
CONCLUSION – AFTER A GOOD PERIOD LATE IN 2011 AND EARLY-2012, THE ECONOMY MAY BE ENTERING A “SOFT PATCH” ONCE AGAIN, WHICH COULD LEAD TO SOME MILD PRESSURE ON THE COMMERCIAL PROPERTY SECTOR.

A combination of slowing economy, which could once again raise vacancy rates, and a rise in long bond yields as global economic jitters are renewed, could be expected to see capitalisation rates rise mildly towards the 2nd half of the year, exerting downward pressure on real commercial property values after a recent period of relative strength.

So, whereas 2011 saw the commercial property sector appearing to strengthening as the year progressed, it looks as if 2012 may see the opposite, with the 1st half of the year proving the stronger half of the year, as the global economy comes under pressure as the year progresses.

During this period, if one could generalise, it would appear that prime properties and areas look set to hold up better than the “less illustrious”. Already, the IPD has reported a significantly more rapid rise in office vacancies of Central Business Districts (15.4% in 2011) compared to de-centralised nodes (11.1%). Similarly, in the case of retail, it has been the smaller community (8.4%) and neighbourhood (8.9%) shopping centres that have seen more noticeable rises in vacancy rates, while regional (2.7%) and super-regional (3.3%) shopping centres remained at far lower vacancy rates in 2011.
FNB Property Barometer_Commercial Property Review _ Q1 2012

SA's affordable housing sector ailing
Moneyweb - South Africa
JOHANNESBURG – The affordable housing sector remains under pressure even as demand for urban accommodation remains at a staggering 1m homes.

Of the country’s four major banks, most indicated they were in the process of devising ways of assisting potential homeowners who don’t currently qualify for state housing subsidies.

Head of Nedbank’s affordable housing, Jeff Lawrence, says the bank is in consultation with government over its proposed “mortgage disclosure insurance company”. Through this instrument government plans to assist banks in the event of default payments or repossession by the banks. It will cover the banking institutions in the event of any potential losses.

Lawrence has echoed the view of other banks in that the group is committed to the affordable market. “It is the growing middle class of the country”.

Standard Bank says it is currently the biggest lender in the affordable housing sector in South Africa with a market share of 32%. The bank’s director of affordable housing Nicholas Nkosi, says the huge backlog in this sector is contributing towards the growing demand for homes in this sector. “With the sheer volumes of urbanisation we are continuously playing catch up.”
moneyweb.co.za

When Selling A Home There Is Still Absolutely No Replacement For A Show Day
Rawson - South Africa
Those house sellers who have kept abreast of what is happening in the residential property marketing sector, says Tony Clarke, managing director of Rawson Properties, have, quite rightly, learned to place great faith in the effectiveness of online platforms and to prefer agencies which are technologically up to date. At Rawsons it has now been estimated that in middle to upper income bracket over 60% of buyers are using their PCs, laptops, iPads and Smartphones to scout for properties.

Information technology, says Clarke, has been shown to save time and effort for both the buyer and the estate agent.

But, he adds, show houses are still an absolutely vital part of any effective house selling campaign and anyone querying their validity and hoping to “do the job” purely by means of IT is making a radical mistake.

“A recent Las Vegas survey has shown that homes put on show have a 17% better chance of selling within 70 days than those only advertised in the media.”

“Home sellers,” said Clarke, “understandably dislike putting in the extra effort to have their home and garden spick and span for a show day. They also dislike having to move the whole family (possibly even the pets) out for four or five hours – and they tend to be particularly upset if they then learn that only a few visitors turned up (some of whom were simply their inquisitive neighbours).”
rawson.co.za

Absa 2nd Quarter Housing Review
Absa - South Africa
The economy
The outlook for the South African economy is as follows:

  • Real GDP growth of 2,7% is forecast for 2012, accelerating to 3,6% in 2013.
  • Headline consumer price inflation is projected to average just above 6% this year before tapering off to 5,8% in 2013.
  • Against the background of expected global and local economic developments and the abovementioned expectations in respect of inflation, interest rates are forecast to remain at current levels until late this year before being hiked to keep especially core inflation (headline consumer price inflation, excluding food, non-alcoholic beverages, petrol and energy) under control. The forecast is for interest rates to rise further in 2013, with prime and variable mortgage rates to peak at 11% by the end of next year.

The residential property market
The residential property market is expected to continue to be affected by macroeconomic trends, the state of household finances, consumers’ risk profile and consumer confidence.

The affordability of property and accessibility of mortgage finance will remain key to the housing market, driven by factors such as property prices, property running costs, financing and transaction costs, households’ financial position, the state of consumer credit records and banks’ lending criteria.

The housing market is forecast to continue showing a subdued performance in respect of price growth in 2012. In real terms, i.e. after adjustment for the effect of inflation, house prices are set to deflate further in 2012 and 2013, which will be affected by trends in nominal prices and headline consumer price inflation.
Housing Review 2012 Q2

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