Web Bytes 259

Poorer distribution prospects for listed property sector
Rode - South Africa
Even as the income streams of listed property funds are still showing fairly robust growth, softer direct-property fundamentals will most likely hinder future distribution.

Over the three months from July to September 2009, the yearly growth of income streams from property loan stock funds still managed to average roughly 10% (the shaded area in the corresponding graph). But, given the economic climate, one has to consider how conditions have changed at ground level, given the impact that a softer economy is having on direct-property fundamentals.
Rode

FNB Residential Property Barometer - Tshwane
FNB - South Africa
Interpretation/Conclusion
Although not expected to be a strong recovery, the 3rd quarter Barometer points to significantly stronger demand situation in the Tshwane Metro residential market compared to a very low activity rating last year. This metro may well be one of the more stable ones economically because of a large government component, and government employment and remuneration is generally very stable.

However, the city was not spared the recent recession, while the high rate of economic growth in the area prior to the recent downturn was accompanied by what appeared to be a very high level of building activity. The net result has been an oversupply of residential stock in recent times it would appear.

The 3rd quarter jump in demand was significant, although other key indicators such as average time on the market and percentage of sellers achieving their asking price haven't shown any meaningful improvement yet. Deeds data runs a bit behind, and still shows widespread price deflation as at the 2nd quarter, but this is expected to change slowly for the better in the numbers for the 2nd half of 2009, tracking the national trend back towards price inflation.

To date, the demand improvement is largely the result of interest rate cuts, and banks' responses to better market conditions by relaxing lending criteria has re-inforced the trend. In the near term, though, the economy is expected to provide more support for the market as we emerge from recession.
FNB Residential Property Barometer - Tshwane

FNB Mortgage Market Update
FNB - South Africa
Growth in the value of mortgage loans outstanding continues its multiyear
decline, despite new lending starting to pick up
Given the leads and lags between changes in direction in new mortgage lending and the catch-up of capital repayment trends, it comes as little surprise that total mortgage advances outstanding continued its multi-year declining growth trend in September 2009. Total mortgage advances outstanding grew in value by 4.8% year-on-year in September, down from the previous month's 5.6%.

The downward trend is very much household and residential market driven, purely due to residential mortgage loans accounting for near 80% of the total mortgage market. The value of residential mortgage loans outstanding grew by a mere 5.3% in August, down from 5.9% in the previous month and now well down from the 32.9% high reached in October 2006.

However, the far smaller commercial mortgage sector has also come under pressure during these recessionary times, and the growth in value of commercial mortgage loans outstanding has also slowed considerably from a November 2006 high of +41.6% year -on- year to 11% as at August.

This all begs the question as to whether the total mortgage book of the financial sector will head into negative growth territory before it reaches its turning point? Quite possible now, given the extreme nature of the lending/borrowing pullback from around 2007 until very recently, and given the lag time before this is fully reflected in the trend in loans outstanding.
FNB Mortgage Market Update

Read that Title Deed and beware of shysters
RealEstateWeb - South Africa
How the ignorant get duped by town planners and other property industry professionals

Few people have ever read the deeds to their properties, and even fewer check with town planners when purchasing property. Ignorance can be bliss, but it can also be catastrophically costly, as we have discovered.

Estelle E (we're not using real names) is a social worker and bought a property in a Pretoria suburb where homes were being turned into businesses at a rapid rate in the early 2000s. The property was owned by another social working firm and they had no prior trouble, so the deal was done.

As business rights on the property had not been finalized, Estelle immediately appointed a private town planning specialist to continue with the application. A few years and a few thousand Rand down the line, Estelle kept being told that the town council was "stalling" with the application.
RealEstateWeb