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The drivers of house prices
South Africa - Rode
The house market is not a global market like commodity markets. Thus, if house prices in Cape Town are cheap relative to Melbourne, potential buyers of houses in Melbourne do not flock to Cape Town, thereby pushing up prices in Cape Town. Put differently, fixed properties – with the emphasis on ‘fixed’ – are not globally tradeable or transportable like crude. Because one cannot live in Cape Town and commute daily to Melbourne, prices in Cape Town will not eventually – through arbitrage – equate those in Melbourne. But one can buy Saudi-Arabian crude (a transportable commodity) and deliver it in South Africa.

The main short-term drivers of house prices are growth in household incomes in a city (“the economy, stupid”) and interest rates. The two combined can be seen to constitute ‘affordability’. Because cities’ growth paths may differ, it is preferable to evaluate house prices by city.

As for interest rates, the world is in an era of extraordinarily low interest rates, which inevitably pushes up asset prices, including the prices of real estate and stocks. This of course has the effect of making the rich even richer, thereby increasing wealth disparities. This is apart from the global economy that is progressively demanding more knowledge workers and fewer menial workers. Thus, both wealth and incomes are getting more unequal. These are forces that no politician can control, although Mr Trump of the US is doing his best.

Real estate buyers becoming environmentally aware
South Africa - Property360
More people are installing green features in their homes to avoid the threats of load-shedding and Day Zero

Environmental decline is a growing concern for many South Africans, but it is the constant threats of drought and load-shedding – plus the increasing costs of water and electricity – that are pushing them to live greener lifestyles.

They usually begin with their homes. Driven by the drought, Capetonians in particular are using indigenous shrubbery in gardens or even artificial grass, says Grahame Cruickshanks, managing executive of market engagement at the Green Building Council of South Africa. Energy-efficient lighting and lowflow water adaptions to taps and shower fittings are seen in many homes; energy-efficient white goods are more in demand.

Residential building statistics
South Africa - Absa
Huge divergent trends in residential building activity in Q1 2019

The first quarter of 2019 saw significant diverging trends at a segment level in private sectorfinanced residential building activity in South Africa (see explanatory note). On a year-on-year basis the number of building plans approved by local government institutions was lower in January to March, whereas the number of housing units reported as completed showed strong growth over this period. These trends in first-quarter residential building activity may be the result of significant lags in the reporting to and/or approvals by local government institutions.

The number of building plans approved for new housing was down by 19,3% year-on-year (y/y), or a total of 2 958 plans, to 12 385 plans in the three months up to March this year. This drop in plans approved came on the back of marked contractions in the two categories of houses in the 3-month period compared with a year ago. The volume of new housing units reported as being completed was up by 47,9% y/y, or 6 848 units, to a total of 11 890 units in the first three months of the year. The number of flats and townhouses completed increased by a massive 90,6% y/y to 7 042 units in this period.
Building stats March 2019

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