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14 November 2013

Property Barometer - Township Markets
FNB - South Africa
FORMER BLACK TOWNSHIP HOUSE PRICE GROWTH SLIGHTLY AHEAD OF “SUBURBS” OF LATE

The areas formerly classified as “Black Township Areas” under Apartheid Era classifications have outperformed the former White “Suburbs” in terms of house price growth for much of the period since 2006, playing some catch up off a very low price base. And we estimate that they have continued to marginally outperform as of late too.

In the 3rd quarter of 2013, the FNB Former Black Township House Price Index for Major Metro regions rose by 6.9% year-on-year. This is slightly higher than the 5.2% revised growth for the previous quarter, and mildly higher than the 5.8% recorded for the entire market in the 6 major metros (Ethekwini, Cape Town, Nelson Mandela Bay, Ekurhuleni, Joburg and Tshwane).

This relatively more moderate price growth performance since the late 1990s in the Townships (compared to Suburban markets) is partly reflective of improved growth in supply of new stock over the years. Therefore, while there have been periods in the past decade-and-a-half’s property cycle where Former Black Township house price growth has exceeded that of the higher income former White Suburban markets, a look at longer term cumulative performance appears to reveal a market that has not narrowed the price gap between itself and the Suburbs since the late 1990s. Demand in affordable areas is growing steadily over time, but then so is supply, led by various affordable housing drives.
Property Barometer Townships Oct 2013

Outlook for property market remains weak
Rode - South Africa
The key drivers of house prices and residential rentals are showing no vigour, according to the latest Rode’s Report on the SA Property Market.

CEO of Rode & Associates, Erwin Rode, cites weak growth in employment, the cooling in the growth of disposable incomes, still-high levels of household debt, tighter credit standards, and contractions in the number of mortgage loans granted as the culprits that will continue to put strain on price inflation in this sector.

Flat rentals nationally also remain rather flat. “This is no surprise, in light of the persistent financial pressure that many households are under,” notes Rode.

In the second quarter of 2013, nominal market rentals on flats and houses grew by 5% and 4% respectively, whereas market rentals on townhouses posted growth of only 3%. With consumer inflation (excl. housing) of about 6%, this implies that in real terms residential rentals are still contracting. Regionally, flat rentals in Cape Town (+5%) showed the strongest growth. Durban followed with rental growth of 2% while in Johannesburg and Pretoria, rentals were marginally higher, rising by 1%.
Rode

House price indices
Absa - South Africa
Continued slowdown in middle-segment house price growth

October 2013 saw a further slowdown in year-on-year growth in the average value of homes in the middle segment of the South African housing market. The major factors contributing to the downward trend in house price growth are base effects, slowing monthon- month price growth, which leads to lower year-on-year price growth, and conditions with regard to the economy and household finances in general. 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).

Nominal year-on-year price growth was slowing down further in all three categories of housing in October from September this year. The weighted average price growth in the small, medium-sized and large-home segments came to a nominal 8% year-on-year (y/y) in October, down from 8,6% y/y in September. In real terms, i.e. after adjustment for the effect of inflation, middle-segment house price growth was only marginally lower at 2,5% y/y in September from 2,6% y/y in August. This was the result of nominal price growth tapering off further, whereas headline consumer price inflation was lower at 6% y/y in September from 6,4% y/y in August.

Against the background of the above mentioned trends and expectations, single-digit house price growth is forecast to continue in 2014. Based on the outlook for nominal house price growth and consumer price inflation, relatively low real house price inflation is projected for the rest of the year and in 2014.
Absa HPI Oct 2013

Property Barometer - Area Value Bands
FNB - South Africa
There is little to choose between the house price growth performances of different price segments, but the lower end has been performing marginally better of late.
Recently, our FNB Estate Agent Survey has pointed to the lower income/price areas of the residential property market having the strongest fundamentals underpinning them. These fundamentals include stronger activity ratings, and more noticeable declines in the average time that a property remains on the market prior to getting sold.

On a quarter-on-quarter basis, segments’ price growth comparisons would appear to show that the 2 higher priced area value bands have been losing some growth momentum in recent quarters, leading to a mild widening in the price growth gap between the 2 lower segments and the higher end, in favour of the lower value segment. This tends to support the recent findings of our Estate Agent Survey by segment. While all 4 area value bands appear very well-balanced but without any fireworks, early signs of slowing growth in the upper segments could possibly be a sign of household sector financial limitations mounting after a period of slightly stronger general house price growth since early-2012
Property Barometer Area Value Bands Oct 2013

Homecoming sentiment of SA expats bodes well for the residential property
Ennik Estates - South Africa
“When South Africa gets its socio-economic and political ducks in a row, two-thirds of the more than half a million South Africans living abroad could emerge as one of the biggest single drivers of a turnaround in the residential property market.”

Ronald Ennik, CEO of Ennik Estates, bases this view on the results of an international survey which highlights the homecoming potential of South Africans living in foreign countries.

“Commissioned by Johannesburg-based Homecoming Revolution, the research shows that, given an improvement in economic opportunities and the provision of a safe living environment, 64 per cent of South African expatriates would be interested in returning to South Africa.
Homecoming sentiment of SA expats

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