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6 June 2013

Property Barometer - May 2013
FNB - South Africa
OUTLOOK - DESPITE RECENT IMPROVEMENT, HOUSING OUTLOOK MAY STILL BE A MEDIOCRE ONE WITH MAY DATA RELEASES POINTING TO AN ECONOMY UNDER SIGNIFICANT PRESSURE

The key data release in May which has a bearing on residential buyer purchasing power growth was 1st quarter StatsSA GDP (gross domestic product) data. This revealed a very disappointing quarter-on-quarter annualized real GDP growth rate of 0.9%. This in turn had a negative impact on the estimated total employee remuneration (wage bill) growth, which slowed in nominal terms to 7.4%. This is the lowest nominal wage bill growth rate since the final quarter of 2001, and is now well down on the post-2008/9-recession “Relief Recovery” peak of 13.3% reached in early-2010. This suggests still-further slowdown on disposable income growth early in 2013, which probably largely explains the recent steady deterioration in Consumer Confidence.

The other key event that took place in May, and which relates strongly to residential property demand, was the Reserve Bank (SARB) decision to leave interest rates unchanged with its Repo rate at 5% and prime rate at 8.5%., thus offering no additional demand stimulus since the 3rd quarter of last year. The combined impact of no interest rate cutting as of late and slowing wage bill growth could have negative implications in terms of growth in residential demand in the near term, with many economic agencies recently revising economic growth forecasts downward, and growth below 2% looking an increasing possibility for 2013.

But it is questionable whether this residential demand strengthening can continue at a time of such economic weakness, and where we have already seen a steady slowing in growth in the area of real consumer demand as a result.
FNB Property Barometer_May 2013 House Price Index

New construction 'poses threat to property prices'
IolProperty - South Africa
The number of flats and townhouses completed last year ballooned by 51.4 percent year on year. This posed a potential threat to house price growth, Standard Bank warned yesterday.

It attributed the strong growth partly to base effects following four years of declining growth.

But Sibusiso Gumbi, a research strategist at Standard Bank, said yesterday that strong building activity might emerge as an additional source of downside pressure on house prices in the future if these building trends were not met by adequate demand.

Gumbi said the real value of completed residential buildings increased by 6.6 percent year on year in the first quarter of this year from minus 0.8 percent in the fourth quarter.
Iol Property

Inflation – how will this impact property investors?
House Price South Africa - South Africa
Population expansion, increases in consumption and limited resources are coming together along with climate change to pressure the world – this is likely to lead to more turbulence, currency wars, high inflation and a general erosion of living for almost all people except the rich.
House Price South Africa

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