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Property Barometer - September House Price Index
FNB - South Africa
It remains a very stable market, as house price increases continue to more-or-less track consumer price inflation

The residential market can be deemed to be very stable and very “rational” at present. Residential demand has indeed been improving, but the FNB estimates of house price growth in recent months point to no significant change in real house price levels, as nominal house price inflation more-or-less tracks consumer price inflation. This is, however, a significantly better situation from one of real house price decline a few years ago.

Recent economic events continue to by-and-large explain this real price stability without “fireworks”. The economy, too, could arguably be deemed to be “stable but without significant growth”, growing positively but battling to grow even by 2% in recent quarters. In addition, the SARB has kept interest rates unchanged for over a year now, providing perceived “certainty” in aspirant home buyers’ minds perhaps, but no additional stimulus. It also keeps interest rates at levels where “unhealthy” speculative behavior is restricted.

And certain economic indicators released during September lead us to expect this stable situation to persist in the near term, with house price growth not straying too far from consumer price inflation. Obviously, in such a creditdriven market, the lack of further interest rate stimulus features strongly in our reasoning. But in addition, the September SARB Quarterly Bulletin continued to show real household disposable income growth hovering between 2-3%, having grown by 2.4% on a quarter-on-quarter annualized basis in the 2nd quarter, now significantly slower than a peak of above 7% at a stage of 2010. Slower real disposable income growth in recent times has led to a slowdown in retail sales growth, and the FNB Consumer Confidence Index for the 3rd quarter showed an unsurprising deterioration.
FNB Property Barometer September 2013

Credit and mortgage advances
Absa - South Africa
Continued low growth in household credit and mortgage balances

Year-on-year (y/y) growth of 8,2% was recorded in outstanding credit balances in the South African private sector (households and the corporate sector) by end-August 2013, up from 7,4% y/y at the end of July. This higher year-on-year growth in private sector credit balances was mainly the result of improved growth in corporate mortgage and unsecured credit balances up to end-August, whereas growth in household credit balances was somewhat lower from end-July.

The household sector saw outstanding credit balances, which include instalment sales, leasing finance, mortgage loans, overdrafts, credit card debt, and general loans and advances (mainly personal loans and micro finance), growing by 8,2% y/y to R1 344,5 billion up to end-August from 8,7% y/y at the end of July, largely driven by lower growth in the component of unsecured credit balance.

Growth in household secured credit balances (instalment sales, leasing finance and mortgage loans) was unchanged at 5,1% y/y for the third consecutive month in August. At R1 029,3 billion, the share of household secured credit balances in total household credit came to 76,6% at end-August.
Credit and mortgage advances Aug 2013

Deceased estates assets can be 'frozen' for a long time, however, trusts can provide a solution
Rawson - South Africa
When dealing with the transfer of deceased estates there is often a variety of hurdles and taxes that need to be taken into account and avoided, if possible, says Bill Rawson, Chairman of the Rawson Property Group. Property owners, especially those who own multiple properties, need to consider the best ways to minimise tax and avoid difficulties when passing on their assets after their death.

“The major hurdle facing the surviving spouse or other heirs to an estate,” said Rawson, “is that, as soon as the person dies, his or her accounts could be frozen — making it impossible to access their funds. There have been many cases, which could have been avoided, where people have had to endure serious hardship: these people, being unable to access the deceased’s bank account, have had to resort to borrowing money to pay for their daily expenses.”

The problem, added Rawson, is exacerbated by insurance policies being paid into the estate. This is usually the case when the beneficiary shares a bank account with the deceased.
Rawson

Property buyers need a VAT break
IolProperty - South Africa
A VAT concession on newly-built flats and townhouses would level the playing field for young people who want to become homeowners and might also give the labour-intensive residential construction industry a boost.

So says Richard Gray, CEO of the Harcourts Real Estate group, who notes that some 40% of housing demand at the moment is coming from young first-time buyers who favour flats and townhouses, and that builders and developers are responding to this demand by planning and building more of these homes.

'According to StatsSA, the volume of plans passed for new flats and townhouses this year is 43,7% up on last year, and the construction phase of new housing has already increased by 8,6%, even though it is difficult at this stage of the market for developers to compete on price with pre-owned units.'

Indeed, according to the most recent Absa Housing Review, the current average difference in price between a newly-built home and a similar pre-owned one is still around 33%, and given the ongoing above-inflation increases in building costs, the only way for developers to stay competitive is to make the newly-built units smaller, he says.
Iol

Tips for budgeting in sectional title schemes
Propell - South Africa
As prescribed by the Sectional Titles Act, budgeting in sectional title schemes is usually done on a yearly basis by the trustees but it is better to take a five year view and plan accordingly, says Johann le Roux, executive director of Propell.

A common mistake made is assuming that all the owners will pay their levies, and while most people do pay there are always cases of non-payment, said le Roux. If the average of non-payers is applied, then trustees should actually add 6% to the budget to compensate for non-payers.

Ideally, budgets will be established by going through the past three years’ financials before deciding what the figures should be. It is important to know the history of the building to establish what special maintenance projects were done in the past./P>

This allows for proper medium term planning of special maintenance expenses.
Propell

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