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26 July 2012

Third Quarter 2012 Housing Review
Absa - South Africa

  • Real growth in the South African economy slowed down in the first quarter of 2012, largely driven by a sharp contraction in mining production. Growth of less than 3% is forecast for 2012 on the back of a depressed global economy and expected lower growth in gross domestic expenditure. Consumer price inflation is projected to stay below 6%, with monetary policy to remain accommodative for the foreseeable future.
  • The first quarter of 2012 saw real household disposable income and consumption growth slowing down from the preceding quarter. With virtually no net savings available, growth in income and consumption remains closely correlated. The ratio of household debt to disposable income was marginally lower in the first quarter of the year, with the cost of servicing debt remaining under control against the background of low interest rates. Many credit-active consumers were still battling with impaired credit records in the early stages of the year, which affected their risk profile and access to credit. Household finances will continue to reflect macroeconomic and consumer-related trends.
  • Middle-segment house price deflation continued in both nominal and real terms in the second quarter of 2012. In the affordable and luxury categories nominal house price growth remained in positive territory up to the middle of the year.
  • The affordability of housing, as represented by the ratios of house prices and mortgage repayments to household disposable income, improved further up to the first quarter of 2012. However, many households’ ability to take advantage of improving housing affordability continued to be affected by factors such as income trends, debt levels, risk profiles (as reflected by the state of consumer credit records), the National Credit Act, and banks’ lending criteria.
  • Economic growth, employment, inflation, interest rates, household income and debt, the state of consumer credit records, and consumer confidence will remain key factors to the housing market. These factors will impact the affordability of property and the accessibility of mortgage finance against the background of trends in property prices, property running costs, financing and transaction costs, and credit criteria applied by banks.
  • The housing market is forecast to continue to show a relatively subdued performance regarding price growth for the rest of 2012 and in 2013. In real terms house prices are set to continue to deflate over the next 6 to 18 months, which will be the result of trends in nominal prices and headline consumer price inflation during this period.

Housing Review 2012 Q3

Residential Building Statistics - May 2012
Absa - South Africa
Subdued residential building activity continues
Residential building activity in the South African market for new housing was mixed in the first five months of 2012 compared with the same period a year ago. On the planning side only one of the three segments posted positive year-on-year growth up to May this year, while one of the three segments on the construction side contracted on an annual basis in the period January to May.

The volume of new housing units for which building plans were approved by local government institutions was down by 542 units, or 2,7% year-on-year (y/y), to a total of 19 379 in the first five months of the year. The decline was the result of contractions in the segments for smaller-sized houses and flats and townhouses. Five of the nine provinces contributed to the abovementioned overall year-on-year decline in the number of building plans approved for new housing.

The number of new housing constructed increased by 770 units, or 4,9%, year-on-year in the period January to May 2012, with just the category of smaller-sized houses, i.e. houses of less than 80m², showing a contraction in the period. A decline in the number of new housing units built was evident in six provinces.
Building stats _May 2012

Launch of Citiq City Index
Citiq - South Africa
Citiq announced today that inner city apartments have been the best performing property investment in Johannesburg during the period 2000 to 2011, significantly outperforming a similar investment in townhouses over the same period. CEO of Citiq, Paul Lapham, announced that “The Citiq City Index demonstrates the exceptional returns that have been achieved by investors in the Johannesburg inner city. An investment of R100 in an inner city apartment in 2000 would today be worth R567 today. A comparable investment in a townhouse would today be worth R332. It should be noted that both the townhouse and inner city property markets did exceptionally well during this period, benefitting from the property boom that lasted until 2008.”

The strong performance of the Johannesburg inner city market, admittedly from a very low base, has been driven by continued regeneration of the Johannesburg inner city, supported both by private and public sector initiatives, as well as the simple fact that the inner city represents a convenient and affordable alternative to townhouses for people looking for accommodation. Lapham is quick to acknowledge the contribution made by both the Johannesburg Municipality and national government. The introduction of urban development zone tax incentives contributed to large scale private investment into the Johannesburg inner city. The Johannesburg Development Agency and Johannesburg Social Housing Company have also been instrumental in making significant investments in infrastructure and housing in the area. “Today the Johannesburg inner city is a city in transition, with the outlook extremely bright. One only needs to spend some time walking through Braamfontein or downtown Johannesburg to see the difference half a decade of investment has made”.
jikacity.co.za/

Property Barometer - Western Cape House Price Index
FNB - South Africa
The 2nd quarter FNB Western Cape House Price Index showed further year-on-year house price growth acceleration in the province. FNB’s valuers perceive the City of Cape Town Metro to be a stronger residential market than the country areas, and we are of the opinion that the more affordably-priced segments of the market have contributed more to price growth in the region. However, a strained global economy, and indicators pointing to a simultaneous Western Cape economic weakening, could imply near term slowing in the Province’s house price growth once more.
FNB Property Barometer_Western Cape House Price Index Q2 2012_July 2012

Property Barometer - Holiday towns
FNB - South Africa
The improvement in holiday town price growth is believed to be reflecting last year’s mild improvement in holiday property buying off the 2010 low.

However, although the agent holiday buying estimates are volatile from quarter to quarter, broadly lower percentages recorded in the survey in the 1st 2 quarters of this year, compared to last year, suggest that we should not expect too much in the way of improvement in the performance in holidays town markets in the near term.

Rather, given the still high level of ongoing financial pressure in the household sector, along with significant increases in municipal rates and utilities tariffs related to housing, we would expect these markets to continue to lag the more primary residential demand-driven markets of the major metropolitan regions, due to the nonessential nature of holiday home buying. But it does appear that nominal price in holiday towns may be stabilizing.
Property Barometer_Holiday Towns_July 2012

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