High flat vacancy rates put rentals under pressure
South Africa - Rode
Investing in flats used to have the advantage that vacancies were as a rule extremely low. Not anymore.
Investing in the flat market is currently risky due to rising vacancies and resultant slow rental growth, according to Kobus Lamprecht, Head of Research at Rode & Associates.
Lamprecht says the latest national flat vacancy rate based on Rode’s surveys was 7% in the first quarter of 2019, up from 5,5% in the first quarter of 2018, as shown in the accompanying chart. In comparison, flat rentals grew by roughly 4,5% over the same period, according to Rode’s estimates based on Stats SA data. This was the fourth consecutive quarter of slower rental growth after rentals grew by 5,7% in the first quarter of 2018.
Worryingly, this is a structural adjustment in the market. To illustrate, vacancy rates in Johannesburg and Cape Town were between 1% and 3% ten years ago but are now in the high single digits, as shown in the table. On a provincial level, the highest vacancy rate was recorded in Gauteng (9,3%), according to TPN’s fourth quarter 2018 data. The vacancy rates of KwaZulu-Natal (6,5%) and the Western Cape (5,7%) were also high. This bodes ill for the prospects for flat-rental growth.
South Africa - FNB
FNB House prices relatively flat in March
The FNB HPI was relatively flat at 3.8% y/y in March, versus 3.7% y/y in the previous month. This takes the first quarter nominal house price growth to 3.8% y/y, slightly softer compared to 4Q18 (4.1%), but much stronger compared to 1Q18 (3.2%). This means that house price appreciation still languishes below inflation, reflective of the enduring pressure on household incomes amid a depressed macro-economic environment.
Market activity indicators remain subdued
FNB’s valuers rate current residential housing demand as weakening and supply strengthening. We note, however, that the pace at which properties are entering the market has slowed noticeably in recent months. This, however, has not been enough to prevent a modest shift in the balance of demand and supply in favour of buyers. Consequently, we saw a further decline in the FNB Market Strength Index to reach a reading of 49.46, keeping it below the 50 mark for the tenth consecutive month. This below-50 reading means that valuers rate residential supply as stronger than demand (explanatory notes at the end of the report).
Property Barometer March 2019
Why use a bond originator?
South Africa - Rawson
You’ve done the research, you’ve found your ideal neighbourhood, done the slog work of house hunting and have made an offer on your dream home! Now you just need to get a home loan… For many people, however, this is where the joy in purchasing property a home ends – the questions and uncertainty around where to start, which banks are likely to give a loan, what documents do you need, and so forth.
If this is where you find yourself, fear not! The help of a bond originator will be your saving grace – it’s their job to make the complicated process of applying for a mortgage an easier and more convenient one for you. Here are five more reasons why this is the best route to go!