FILTERS:

Web Bytes 452

10 October 2013

September House Price Indices
Absa - South Africa
Declining trend in middle-segment house price growth continues

Year-on-year growth the average value of homes in the middle segment of the South African housing market slowed down further in September 2013. The slowing house price growth came on the back of base effects, with month-on-month price growth still slowing down and thus contributing to lower year-on-year price growth. These trends in home values are according to the Absa house price indices, which are based on applications for mortgage finance received and approved by the bank in respect of middle-segment small, medium-sized and large homes (see explanatory notes).

All three categories of middle-segment housing saw year-on-year price growth slowing down further in nominal terms in September from August this year. In real terms, i.e. after the adjustment for the effect of headline consumer price inflation, house price deflation accelerated in August in both the small and medium-sized segments of the market. This was the result of nominal price growth tapering off further, whereas consumer price inflation edged up to 6,4% year-on-year (y/y) in August from 6,3% y/y in July. Year-to-date nominal and real house price growth in all three segments of housing was well in single digits in the first nine months of the year.

The average nominal value of homes in each of the three middle-segment categories was as follows in September 2013:

  • Small homes (80m²-140m²): R757 400
  • Medium-sized homes (141m²-220 m²): R1 089 800
  • Large homes (221m²-400m²): R1 653 700

Absa House Price Indices Sep 2013

Investment and leisure property estate agent survey
FNB - South Africa
Buy-to-let home buying remains a low priority in an overwhelmingly primary residence-driven market

While the residential rental market has yet to see any fireworks in terms of rental inflation, one of the positive developments from a letting landlord point of view in recent years has been a very slow pace of growth in the supply of available rental stock. This potentially allows demand for rental space to ultimately catch up, and thus lays the foundation for stronger future rental inflation.

This implies that, although there is growth in the total number of “non-primary” residences, this growth is pedestrian, and means that as a percentage of total home ownership,this group of properties is relatively stable at around 16.5%, after a major rise through the years 2004-2008.

Slow growth in investment property ownership is ultimately a positive for landlords, as it constrains supply of rental property availably, which should ultimately mean stronger rental income growth. However, in recent times, the FNB-TPN estimates have been moderate rental inflation of near to 5%, and the benefits of rental supply constraints may only be witnessed more significantly the next time interest rates rise and home buying popularity recedes somewhat.
FNB Property Barometer Q3 2013

Estate agent home buying survey
FNB - South Africa
3rd Quarter survey sees further slight decline in Estate Agent perceptions of activity, but market balance may have improved nevertheless, and agents remain upbeat.
Therefore, the bulk of the agents foresee a near term increase in activity levels, mostly due to seasonal factors as summer nears. But examining the non-seasonal factor, one nevertheless still sees a leaning of the group of respondents towards “positive” factors with regard to market performance. We put “positive” in inverted commas because not everyone sees the same factor as a positive one. But from a property market performance point of view, as reflected in price growth, stock constraints are a positive factor (though often being a negative factor for agents whose living depends more on volume of sales). More agents cite stock constraints than those claiming oversupplies, and the percentage citing stock constraints remains relatively high of late compared to prior years. A slightly greater percentage see positive consumer sentiment compared to those who cite economic stress pessimism, and low interest rates are seen by more as a positive than those seeing them as a negative.

As yet, therefore, it would not appear that the past quarter’s mild decline in perceived residential activity has had any significant impact on estate agent confidence levels, if their near term expectations are anything to go by.
FNB Property Barometer Home Buying Q3 2013

Credit amnesty may trip up rich property owners
Iol - South Africa
Although the impending credit amnesty is aimed at making it easier for individuals with adverse credit records to obtain finance, lenders are likely to apply even more conservative practices as they have placed huge reliance on credit information from credit bureaus.

Wealthy property owners who have previously struggled to get loans due to their impaired credit files may continue to struggle, even if they have the assets for security, says Gary Palmer, chief executive of Paragon Lending Solutions, a private non-bank lender.

He says the increased risks of not knowing clients' histories could result in delays in obtaining finance from banks and the costs of financing loans may increase to cover the risks.

'The banks have strict lending criteria due to new regulations, such as Basel 3, which have already resulted in delays in loan-approval times. If the new legislation is passed, the banks will tighten up even further to protect themselves, if they are uncertain about a client's capacity to repay a loan.'
IolProperty

Submit your comment:
 
Name
EMail
Comments
Security Picture (click to change)
Word shown in picture: