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5 September 2013

Property Barometer - August 2013 House Price Index
FNB - South Africa
CONCLUSION
The residential market is in an interesting “space” at present. On the one hand we have had signs of gradually improving demand along with increasing supply constraints. On the other hand, we have had a slowing pace of real household disposable income growth in recent times, resulting in weakened consumer confidence according to the FNB Consumer Confidence Index. It thus seems to be a case of the housing market moving in the opposite direction to the consumer economy.

Or is this really the case? Perhaps, rather, it is case of us having become so used to weak housing market performance from 2008/9 onward, that 6-7% house price growth appears strong. But in actual fact this range of house price growth is only just keeping ahead of consumer price inflation, and is thus not yet strong in real terms. And so it probably shouldn’t be yet. The FNB Valuers’ Market Strength Index remains below 50, still pointing to the valuers as a group rating supply as stronger than demand. In our FNB Estate Agent Survey, while more agents are pointing to stock constraints, the estimated average time of houses on the market still seems a bit long at around 17 weeks (2nd quarter survey), also not yet suggesting an “extreme” demand relative to supply just yet.

Therefore, while the residential market has been “on the mend” for some time, in terms of demand relative to supply, it is a slow process, and 6-7% average house price growth should not be seen as “strong” given where our country’s general inflation rate is. It is also a very “sane” market at present, it would seem, free of large-scale speculative activity, and the general feedback seems to be a market where new buyers “shop around” and “bide their time”.

So, while the housing market is in a relatively good space at present, it’s nominal inflation rate is not yet impressive when view in real terms, and so it probably shouldn’t yet be.
FNB Property Barometer_August 2013 House Price Index

Credit and mortgage advances
Absa - South Africa
Household credit and mortgage balances growth remains subdued
Outstanding credit balances in the South African private sector (households and the corporate sector) showed growth of 7,4% year-on-year (y/y) to R2 499,1 billion at the end of July 2013, down from 8,9% y/y at the end of June. This lower year-on-year growth at the end of July compared with June was mainly the result of growth in corporate credit slowing down to 6,0% y/y from 9,1% y/y at end-June.

Growth in outstanding credit balances in the household sector (R1 339,4 billion at end- July), which include instalment sales, leasing finance, mortgage loans, overdrafts, credit card debt, and general loans and advances (mainly personal loans and micro finance), came to 8,7% y/y at the end of July.

Growth in household secured credit balances (instalment sales, leasing finance and mortgage loans) was unchanged at 5,1% y/y in July from June. At R1 023,5 billion, the share of household secured credit balances in total household credit tapered off to 76,4% at end July from 76,6% at end June this year.
Absa Credit and mortgage advances Jul 2013

Ruling breaks new ground on property approvals
iolProperty - South Africa
A damning judgment delivered by the Supreme Court of Appeal last week could see thousands of homes and offices in South Africa demolished and property developers facing criminal charges.

The judgment, which upheld an earlier judgment of the Eastern Cape High Court, was delivered by five of the country's top judges. The case involved a Rhodes University tax professor whose luxury R8 million home at Kenton-on-Sea near Port Alfred was built without the necessary planning permits. The judgment comes after seven Hight Court applications over 10 years opposing Matthew Lester's multi-million rand 'mansion'.

The Supreme Court judges said that when a building was erected without approved plans in terms of the National Building Regulations, the court had no discretion, but to 'enforce statutory prohibitions.' The judges further noted that in Lester's own words he, 'walked the officials of the various departments through the plans resulting in them being approved on the same day'. However none of these new plans were shown to the neighbour who had a vested interest in the development.
IolProperty

An increase in buy-to-let investors proves highly beneficial to property developers
Rawson - South Africa
The steady increase in buy-to-let residential property investors has been both heartening and beneficial to property developers, says Bill Rawson, Chairman of the Rawson Property Group, whose own development company, Rawson Developers, has already completed five new developments in five years and still has two years of new work already secured.

However, said Rawson, it is surprising how many intelligent people investing successfully elsewhere have not yet realized the profit potential in property right now, especially on new developments.

“A survey done by our development teams,” said Rawson, “has shown that in the three months since the completion of The Rondebosch development in Belmont Road, Rondebosch, where prices were pitched from around R800,000 to R1,2 million, resales have been taking place at mark-ups of anything from 10 to 32%, while those who chose to rent out their units have been getting 6 to 8% returns from day one.”
Rawson

The benefits of buying property abroad
Moneyweb - South Africa
raditional property ownership in global cities including New York, London and Paris were made purely for offshore investments in hard currency.

However, private wealth and property professionals agree that the majority of South Africans who own property abroad are increasingly seen to hedge their options on more than traditional income and capital appreciation.

Latest trends point to the benefits derived from foreign residency and citizenship as major attractions for all levels of wealthy South Africans. Low level tax regimes and no exchange control restrictions are no longer the only prospect of foreign residency. Unbeatable travel opportunities around the globe facilitated through any number of visas that accompany residency packages, is the added opportunity of acquiring permanent residence abroad.
Moneyweb

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