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7 June 2012

Property Barometer - House Price Index May 2012 
FNB - South Africa
Conclusion
While house price growth on a year-on-year basis accelerated further to 9% in May, a loss of month-on-month price growth momentum over the past 4 months suggests that the year-on-year growth peak in the FNB House Price Index is not far off.

Various economic data released during May also suggest that the housing market is set to head into a “softer patch” again. Economic growth slowed mildly in the 1st quarter of 2012, and various global and domestic data point towards further slowing in the current quarter.

The SARB did, at its MPC meeting in May, heighten doubt as to whether the next move in interest rates would be up, and one can’t rule out the rate cutting option should the global and local economy weaken significantly. However, for the time being, interest rates remain unchanged since late-2010, implying no new stimulus, at a time when the global economy appears to be slowing.

All of this points to a near term period of slowing house price growth, and although we can’t yet observe this in the year-on-year inflation rate of the FNB House Price Index, it has already been observed in the month-on-month price growth rate.
FNB Property Barometer May 2012 House Price Index 

Analysts answer:  to buy property or not?
Moneyweb - South Africa
Be guided by the property cycle and your buying reason.
JOHANNESBURG – Buying property, whether it is your first time or not, is for most of us a major decision likely to impact our lives for the foreseeable future. Analysts and market watchers to whom we frequently look for advice are often loathe to share their wisdom in this regard, lest they be accused of having agendas. Estate agents and bankers notably fall into this category.

While again drawing on their expertise, it is hoped readers will be able to glean some useful information from their views.

We begin with some pointers from economist Chris Hart of Investment Solutions. “If you are making an investment …what is the return on the investment and what is the return going forward? Is it cheap or expensive in relation to other assets you can buy? Are the rental returns on the price you’re going to buy at competitive to equity, bonds, inflation-linked bonds or listed properties? That’s basically the criteria you have to apply as an investor.”

Hart says in this regard he is not convinced buying property is the way to go, but it does depend on the market segment you have your eye on.
Moneyweb

May 2012 House Price Indices
Absa - South Africa
Pace of house price deflation slowing down
Deteriorating house price growth in the South African residential property market appears to be turning the corner. The downward trend in house prices started to level out recently, with month-on-month price changes in the process of returning to positive territory. These trends are according to the Absa house price indices, which are based on the average value of homes for which the bank received and approved applications for mortgage finance in the small, medium-sized and large categories in the middle segment of the market (see explanatory notes).

The segments of small and medium-sized housing still recorded nominal year-on-year price deflation in May this year, with the pace of price deflation slowing down in the small category. No further nominal month-on-month price deflation occurred in these two segments in the past two months. The category for large housing saw a marginal uptick in nominal year-on-year price growth since April. Real price deflation, however, continued in all three segments on the back of headline consumer price inflation, which averaged 6,1% year-on-year in the first four months of the year.
Absa House Price Indices May 2012

Why Warren Buffett thinks rental homes are a good investment
RealNet - South Africa
In recent months, Warren Buffett, CEO of Berkshire Hathaway and arguably the world’s top investment brain, has repeatedly said that private investors should now be buying up as many single family homes to rent out as they can afford.

“And he has given several good reasons for this unequivocal advice which we believe are just as relevant in the SA property market now as in the US and other property markets around the world,” says Jan Davel, MD of the RealNet estate agency group.

In an interview on CNBC television and again in the International Business Times, Buffett said that both equities and single family homes were attractive investments at the moment in terms of price, but that if they could be purchased at low rates and held for a long time, the houses would be a better investment. Indeed, he said, he would buy up “a couple of hundred thousand” homes right now if he could only find a practical way to manage them.
What Buffett thinks

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