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19 September 2013

Residential Yield Review
FNB-TPN - South Africa
AFTER RECOVERING SOME ATTRACTIVENESS AS AN INVESTMENT FROM 2008 TO 2011, MORE RECENTLY WE HAVE SEEN SOME RESIDENTIAL YIELD COMPRESSION RESUMING.
After slow house price growth from 2008 to late-2011 had allowed rentals to play some mild catchup with residential property values, a period of improved house price growth performance through 2012 and the 1st half of 2013 translated into a resumption of yield compression (decline), thereby arguably diminishing the attractiveness of residential property as an investment purchase mildly. This is the view of John Loos, Household and Property Sector Strategist at FNB, and Michelle Dickens, Managing Director of TPN (Tenant Profile Network) Credit Bureau.

So, while homeowners would perhaps be excited by evidence of mildly stronger house price growth since early-2012 and in 2013 to date, compared to the prior few years, such news may not necessarily be as exciting for an aspirant buy-to-let investor. “This”, says Dickens, “is because the investor should be strongly focused on the income stream that an investment property generates, relative to the price paid, and so a far better number to focus on (than capital growth) would arguably be the “initial yield”, i.e. the income expected to be earned over the next year divided by the property value”.

Loos says, “for this purpose, we have attempted to estimate a yield data series for the country as a whole, along with key regions and segments”.
Residential Yield Review

Johannesburg's residential transformation
IolProperty - South Africa
Joburg's reputation as a violent city is changing, and it's fast becoming the place to live.

This is confirmed by the fact that there is now less than 1 percent chance of finding a decent flat to rent in the inner city, as residential vacancies and arrears hit a historic low - and pave the way for a new surge of investor interest.

And crime has decreased, especially in the residential improvement districts around the inner city. Andrew Schaefer, managing director of national property investment and management group Trafalgar, says there has been a steady improvement in vacancies over the past 18 months.

These reduced vacancies follow an oversupply of rental units two years ago when about 2 500 units were released in buildings that were converted from commercial to residential over a short space of time.

'The vacancy impact was most marked in bachelor and one-bedroom units, and this oversupply has taken about a year to be absorbed,' he said.
IolProperty

SA property market: healthiest in years
Moneyweb - South Africa
Trends, local hotspots and how we compare globally.

In recent years, SA's property prices have been depressed, with a decidedly negative sentiment in the market. But it seems the tide is turning, with the market holding its own among the world’s top performing and sales now finally topping those of the World Cup.

The local housing market is in the healthiest position since 2009, says Samuel Seeff, chairman of Seeff Properties.

Sentiment has lifted and investors are returning to property as confidence resurges, confirms Laurie Wener, MD of Pam Golding Properties Western Cape, who adds that buyers remain value-driven and well informed.

And it shows in the numbers. FNB’s House Price Index for August reveals the overall market grew 6.4% (up 0.1% on July).
Moneyweb

Residential Property Indices
Lightstone - South Africa
The Lightstone Extended House Price Inflation index estimate for national property inflation was 6.67% for July 2013 which is slightly down from the previous month. During the past couple of months it has been observed that yearly house price inflation of sectional title properties have steadily been increasing above that of freehold properties. The average year on year inflation of sectional title properties was estimated at 7.36% in July while that of freehold properties was estimated at 5.33% . But sectional title properties still have some way to go before they record the same growth seen in the freehold properties since 2000. Sectional title properties and freehold properties have grown at roughly the same rate with freehold properties having grown a mere 4% more than sectional title properties over the period of 2000 to 2009. Freehold properties have however appreciated at a faster rate since the subprime mortgage crash and grew by 22% from 2009 to the end of 2012. Sectional title properties however appreciate by only 15.5% over the same period. Only time will tell if this increased growth in complex units and apartments is due to market corrections or a shift in consumer preferences and increased demand.
Lightstone

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