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11 April 2013

House Price Indices - March 2013
Absa - South Africa
House price growth showing signs of slowing down
Year-on-year growth in the average value of homes in some categories of housing in the middle segment of the South African residential property market appears to have reached an upper turning point. As expected for some time, base effects and slowing monthly price growth since mid-2012 have caused year-on-year price growth to start moderating. These price trends 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).

Middle-segment house price growth came to 11,8% year-on-year (y/y) in March 2013, after rising by a revised 10,9% y/y in February. Real price growth was recorded at 4,8% y/y in February after adjustment for the effect of consumer price inflation, which was 5,9% y/y in the month.

Nominal year-on-year house price growth appears to be peaking in some categories of the middle-segment of the market, influenced by market conditions and slowing month-on-month growth in the past few months. Nominal price growth for the full year is forecast to be in single digits, with real price trends to be driven by a combination of nominal price movements and consumer price inflation.
Absa House Price Indices March 2013

'Don't be fooled by phantom offers for your property'
Iol - South Africa
Property sellers should ensure that any offers made to buy their homes are genuine - or they will run the risk of delayed transactions and extra holding costs.

This warning comes from Fransiska Schutte, owner the RealNet Wilgers & Surrounds franchise in Pretoria, who says incidents of unscrupulous agents tricking sellers into thinking that a deal is done are surfacing in many areas of the country, including her area of operation.

"It is a disturbing trend and consumers not only stand to lose valuable marketing time, but can also incur extra holding costs amounting to many thousands of rands," she says. "And in our experience it is not only unseasoned first-time sellers falling into this trap."

She explains that unethical agents are, in effect, tricking home sellers in order to obtain de facto sole mandates to market their properties. "What usually happens is that an agent will present a fictional offer to purchase, at the seller's asking price and with attractive conditions. The relieved seller then notifies all other agents marketing the property that it has been sold. This leaves the field clear for the dishonest agent to find a real buyer without any competition."
RealNet Press Release

Household and consumer sector – Will residential property "pressure" consumer sectors further?
FNB - South Africa
While far from booming, a mildly recovering residential property market, and growing residential stock constraints, may just pose some further “downside risk” for already-slowing consumer sectors’ growth rates, as the household need for greater residential fixed investment gradually grows.
In recent weeks, the question has begun to arise as to why it would be that the household sector’s consumer spending growth has become increasingly constrained, while simultaneously it would appear that residential property demand has been noticeably picking up. This would appear surprising to some, as it is the same household sector with the same frail financial situation that spends both on consumer goods and services as well as on housing. And a “partial reprioritization” in household spending may just mean that a gradually rising need for new residential properties further constrains already pressured consumer spending growth further.

Indeed, the slowing growth in real household consumption expenditure makes sense, slowed by the tapering off in real household disposable income growth since a peak of above 6% at the end of 2010, and this is expected to lead to a slower 2013 growth rate in the country’s retail sector.
FNB Housing vs Consumption Apr 2012

Continuing low interest rates raise confidence in the housing market
Rawson - South Africa
According to Bill Rawson, Chairman of the Rawson Property Group, the decision made by the Monetary Policy Committee to leave the interest rates unchanged was expected by almost everyone in the residential property sector because unemployment in South Africa is still at very high levels and GDP growth remains unimpressive – with most forecasts predicting between 2,2% to 2,7% this year.

“The government has its eyes on the 2014 election and is, it seems, likely to keep in with COSATU. The government realizes, therefore, that employment has to be improved and keeping the interest rates low is one means of helping in this matter.”

Rawson added that operators in the residential sector can be grateful that the interest rates are remaining unchanged because it will reinforce the public’s belief that rates are likely to remain low for the foreseeable future, i.e. for 18 to 24 months, which, in turn, encourages potential home owners to take the plunge – if they can get a bond.
Rawson

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