Web Bytes - 586

30 June 2016

Falling import volumes could place a damper on industrial-rental growth
Rode - South Africa
For now, the current cooling in the growth of retail sales volumes and contracting import volumes do not bode well for the demand for warehouse space to rent, and consequently market rentals.

In April 2016, real retail sales showed yearly growth of only 1%, after recording year-on-year growth of 3% and 4% in March and February 2016 respectively. At the same time, in the first quarter of 2016, import volumes were down by 4%. Note that one has to consider the possible adverse effect that the earlier-than-normal Easter Holidays had on retail sales during April. Yet, given the low levels of consumer confidence and the possibility of more monetary policy tightening, robust growth in retail sales volumes should not be expected.

The corresponding graph shows the very robust inverse relationship between the underlying cyclical component of import volumes and warehouse vacancy rates. Observe - from the shaded area of the graph - how the cycle of import volumes has trended south since 2012, and how warehouse vacancy rates have edged north.

Credit and mortgage advances
Absa - South Africa
Continued low growth in household credit and mortgage balances

Growth in outstanding credit balances in the South African household sector came to 2,4% year-on-year (y/y) at the end of May 2016, with growth in some components of total credit balances distorted (see explanatory note). The value of household credit balances amounted to R1 467,2 billion and end-May.

The value of household secured credit balances (R1 129,9 billion and 77% of total household credit balances) registered growth of 3,7% y/y in the five-month period up to the end of May, virtually unchanged from 3,6% y/y at end-April. This was the result of stable growth in household mortgage balances (see below) and marginally lower instalment sales growth of 1,7% y/y at end-May (1,8% y/y at end-April).

The value of household unsecured credit balances came to R337,3 billion (23% of total household credit balances) at the end of May 2016, declining by 1,8% y/y as a result of the abovementioned data distortions, especially with regard to the component of general loans and advances (mainly personal loans and micro finance), which contracted by 6,3% y/y. Growth in the value of outstanding household overdraft balances was relatively strong at 20,5% y/y at the end of May, mainly as a result of base effects a year ago.
Credit and mortgage advances (May 2016)

Deteriorating consumer confidence sees residential property slowdown
ooba - South Africa
ooba’s property statistics for May show a marked slowdown in house price growth, with the year-on-year change in the Average Purchase Price showing negative nominal growth. The Average Purchase Price is down by -0.5% year on year from R1,072,615 to R1,067,703. This is the first year on year reduction in house prices we have seen since December 2012.

The Average Purchase Price of First-time Buyers is still showing some year on year growth albeit at a slower rate, with a 3% increase year-on-year to R820,155.

Rhys Dyer, CEO of ooba, says: “The slowdown in residential property price growth does reflect slowing demand for property as South Africans are faced with poor economic growth, high inflationary pressures and increasingly expensive credit. A further factor has been a noticeable change in the makeup of properties being bonded with a greater percentage of smaller and medium sized properties in the mix, as compared to the same period last year”

Don't be too hasty to alter your property
Chas Everitt - South Africa
As interest rates rise and it becomes more difficult to qualify for new home loans, it is natural for an increasing number of owners to decide that they would rather make alterations or additions to their existing home than sell and try to buy a new one.

However, it really isn't a good idea to make extensive changes without first checking to see that you will not be over-capitalising your property, says Berry Everitt of the Chas Everitt property group.

"Unfortunately, the money an owner spends on improvements to a property does not always translate into an equivalent increase in its value to prospective buyers. And the result is that when you do eventually decide to sell, you will probably not recoup the full cost of the improvements in the sale price, and your potential profit on the property will be eroded."
Do not be too hasty

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