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2 August 2012

Property Barometer House Price Index - July 2012
FNB - South Africa
CONCLUSION
While house price growth on a year-on-year basis is still at a relatively healthy level of 8.3%, it is believed that the above-8% levels of recent months reflects the peak in the recent resurgence in house price growth which originated during the summer months, and that a broad slowing is once more the order of the day in the near term. This belief is brought about by perceptions of a weak global and domestic economy. Besides a declining SARB Leading Indicator, recent months have seen a broad decline in global purchasing managers’ indices, while consumer related indicators such as domestic real retail sales have also been showing a broad slowing growth trend in the early stages of 2012.

Some may argue that the July interest rate cut will breathe some life into the residential market. It will indeed be a minor stimulus, and one may see a month or two’s slight acceleration in month-on-month house price growth. But beyond that, we don’t think it will totally offset the negative impact of a slowing domestic economic growth rate, and with it a slowing wage bill growth rate.

All considered, therefore, we anticipate a slower house price growth rate towards year end, and although recent year-on- year growth rates have been up above 8%, we anticipate a year-on-year growth rate of around 5-6% by year end.
FNB Property Barometer_July 2012 House Price Index

Property agency applauds call for overhaul of industry
Iol Property - South Africa
In his address to estate agents yesterday, Minister of Human Settlements, Tokyo Sexwale, had a no-nonsense approach to the future of real estate in South Africa, which showed a strong vision and desire for involvement from the players in real estate industry.

Aside from announcing his mandate to reverse the spatial planning framework that harked back to Apartheid times, Tokyo Sexwale also made clear his intentions to regulate financial institutions to a certain degree in terms of their willingness and ability to provide finance to those potential homeowners in the lower and emerging markets.

Perhaps most importantly for the future of real estate in this country was Sexwale's approach to the regulation of South Africa's property industry. His comment that property had been making the headlines for all the wrong reasons was followed by his decisive announcement that the dysfunctional and incompetent Estate Agents Affairs Board (EAAB) had been dissolved and that the Special Investigating Unit would be brought in.
iolproperty.co.za

Further uptick in household mortgage advances growth
Absa - South Africa
Growth in value of outstanding credit balances in the South African household sector was somewhat higher at 7,7% year-on-year (y/y) in June 2012 from 6,8% y/y in May. The outstanding amount of household credit was R1 229,2 billion at the end of June, up by R9,1 billion, or 0,7%, from R1 220,1 billion in May.

Outstanding private sector mortgage balances, comprising commercial and residential mortgage loans, showed growth of 2,2% y/y in June, impacted by a further slowdown in corporate mortgage balances growth of 1,1% y/y from 1,7% y/y in May. The amount of outstanding mortgage balances in the private sector was up by R3,7 billion, or 0,3%, to R1 080,2 billion in June from May.
Mortgage advances _Jun 12_

Key drivers of office demand losing their oomph
Rode - South Africa
For now, no sudden improvement in the demand for office space can be expected as key demand drivers are losing their vigour. This is the opinion of property economist Erwin Rode in the latest issue of Rode’s Report on the S.A. Property Market.

Discouraging for the office demand and vacancy-rate outlook was the deceleration in output produced by the services sector (i.e. GDP of services) in the first quarter of the year. Says Rode of Rode & Associates, publishers of the Report: ”Waning growth of output in the services sector does not bode well for its employment prospects, which in turn implies continued weak demand for office space. Furthermore, slumping business confidence is another bad omen for office demand; this as businesses are unlikely to expand premises or hire new employees while confidence levels are low.”

Thus, unsurprisingly, in the first quarter of 2012, office vacancy rates remained stagnant leading to unimpressive rental performances. In the reporting quarter, the only rentals that could muster any growth at all were those in Pretoria decentralized (+0,5%). Market rentals in Johannesburg decentralized remained at the same level they were a year ago, while those in Cape Town (-1%) and Durban decentralized (-2%) contracted slightly.
Rode

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