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Interest rates cut by 50 basis points
Absa - South Africa
After remaining unchanged since last cut in November 2010, the South African Reserve Bank’s Monetary Policy Committee (MPC) lowered the key monetary policy interest rate – the repo rate – by 50 basis points to 5%. On the back of this cut in the repo rate, Absa announced that its prime lending and variable mortgage interest rates will drop from 9% to 8,5%, effective from 20 July 2012. The market consensus was for rates to remain unchanged.
The latest rate cut will bring the mortgage rate to a level last seen in December 1973, whereas the prime lending rate will be at its lowest level since early 1974. As a result of a further drop in the mortgage rate, monthly repayments on mortgage loans will in general be 35,9% lower compared with early December 2008 when the mortgage rate was 15,5%.
The further cut in interest rates came against the background of a struggling global economy, which is feared to impact the local economy. The headline consumer price inflation rate (CPI) is back within the inflation target range of 3%-6%, after reaching a level of 6,3% year-on-year in January this year. Headline CPI came in at 5,5% y/y in June 2012, with the average for the first six months of the year at 6% y/y. Food price inflation, having a weighting of 14,3% in the headline index, was 6% y/y in June (6,8% y/y in May), averaging 8,6% y/y over the past six months. Core inflation remained relatively stable at around 4,4% y/y in the first half of the year.

Property Barometer 2nd Quarter 2012 FNB Segment House Price Review
FNB - South Africa
In 2011, it would appear that housing affordability made little further improvement, with interest rates moving sideways, house price growth accelerating as 2012 approached, and average employee remuneration growing slower than in 2009/10.

There still exists very significant financial pressure on households, as indicated by the FNB Estate Agent Survey, where the sample of agents estimates that 20% of home sellers are selling in order to downscale due to financial pressure.

Financial pressure, coupled to a lack of significant further housing affordability improvement, we believe, has created an “affordability” or “value for money search” which has been visible in some recent segment trends.

The Full Title segment has outperformed the Sectional Title segment in recent times, because when one compares “like for like” (i.e. 3 bedroom full title with 3 sectional title, 2 bedroom with 2 bedroom etc), the Full Title segment has until recently been more affordable and arguably offered better “value for money”, with the sectional title segment having perhaps “overshot the mark” back in the boom years. However, this may be changing due to the recent more rapid affordability deterioration in the area of full title property compared to sectional title, and as a result we may be starting to see a narrowing of the average house price growth rates between the Full Title and Sectional Title segments, with sectional title price performance starting to improve a little.

When homes are segmented by size, we see smaller-sized homes still outperforming price growth-wise, also a sign of the affordability drive, we believe. This “affordability drive” is expected to continue for the foreseeable future in some form of another, as many households continue to repair their somewhat fragile balance sheets, new entrants especially from previously disadvantaged communities attempt to get onto the housing ladder, and many attempt to adapt to a rapidly changing environment in terms of rising municipal and utilities bills related to housing.
FNB Property Barometer_Segment Price Review Q2 2012

Property Barometer July 2012 Western Cape Estate Agent Home Buying Survey
FNB - South Africa
Therefore, in a nutshell, the picture given by our survey of a sample of estate agents in the Cape Metro is one of further improvement in confidence in the region’s residential property market. This can be seen in the overall Demand Indicator, as well as in other indicators such as 1st time and buy-to-let buying, and increased selling in order to upgrade. An apparent contradiction in the survey, however, is a further lengthening in the average estimated time of properties on the market, simultaneous with a decline in the percentage of sellers having to drop their asking price. Can it be that sellers are also gaining in confidence, and that this is making them hold out for longer in the belief that they will achieve their asking price? Tough to say as yet, and perhaps another quarter or two of data is required to understand this apparent contradiction.
FNB Property Barometer W Cape Estate Agent Home Buying Survey July 2012

Bank valuations ‘distorting property market’
Aida - South Africa
The conservative approach of the lending institutions to granting home loans is now putting selling prices under pressure - and distorting the property market in the process.

So says Aida Pretoria director Johan van der Westhuizen, who explains that banks have become more willing to grant 100% bonds but that they are now more often valuing properties at far below the price agreed by sellers and buyers.

"Banks understandably want to reduce their risk in the face of the prevailing economic conditions but by valuing properties at less than the price that the market has determined, they are in effect prescribing to sellers how much they may ask for their homes.
Bank valuations distorting market

Agony of a Joburg ratepayer
MoneyWeb - South Africa
27 months to complete a house sale.

Oh happy day!

There it stands in my bank account – a credit of R14 750 from the City of Jo’burg. This payment means we never have to deal with those bums in the council again. It’s like winning a lottery.

The payment ends more than two years of anxiety, frustration and disappointment since we sold our house in Ferndale in April 2010.

There have been three chapters –

  1. Signing the deed of sale in April 2010. That took ten minutes.
  2. Obtaining a clearance certificate for transfer to take place. Even with the help of good conveyancers, this took a full year.
  3. Recovering money that Council forced us to overpay before it would effect transfer. After 16 months we have received R14 750 out of a credit balance of R24 000 at time of transfer.


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