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Absa House Price Indices
Absa - South Africa
House price inflation resumes
After almost a year of nominal year-on-year house price deflation in the South African housing market, some price inflation was recorded in the past two months, according to Absa's calculations. Based on recent price trends, it was expected that annual nominal price growth would resume shortly. On the back of these developments as well as declining consumer price inflation in recent months, real price deflation slowed down further in September.

The latest trends with regard to house prices are encouraging, which are based on a further rise in transaction volumes in October, compared with September. This came after transaction volumes appear to have bottomed in August this year.
Absa House Price Indices

FNB House Price Index
FNB - South Africa
The October house price numbers are very much as expected. The FNB Property Barometer survey of estate agents informed us of strengthening demand as from late-2008, while as a home loans bank we began to feel the positive impact of this year's series of interest rate cuts manifesting itself in higher transaction volumes. This was bound to ultimately lead to a
resumption of rising prices in some form, and we are now pretty much at that point.

The outlook remains a "mediocre" one though, as it would appear that the SARB has come to the end of its interest rate cutting phase. There may be an outside probability of a slight further rate reduction, but the Firstrand view is that prime rate is likely to remain unchanged for a lengthy period until late-2010, at which point the next interest rate move is expected to be up. For the time being, the possible end of interest rate cutting should not derail the property recovery, as much of the positive stimulus from interest rate cuts feeds into the market with a considerable lag.

However, by about mid-2010 we expect that stimulus to have fully fed through, implying that an important contributor to the residential market recovery would no longer be there, should our view on interest rates be more-or-less correct. Then it is up to the economy to contribute more strongly. Can the economy come to the party? Indications are that this looks to be increasingly the case. The SARB Leading Business Cycle Indicator for August showed a further month-on-month rise of 2.2%.
FNB House Price Index

Standard Bank Residential Property Report
Standard Bank - South Africa
House prices bottoming out
What is the latest? Standard Bank's property book for the first ten months of 2009 revealed an average monthly decline of 4.3% in the median house price. This brings the number of monthly declines to 17 consecutive months. The October smoothed data yielded a rate of contraction of 4.6% y/y, improving slightly from the declines recorded in August and September There are signs that the residential property market is stabilising and that interest in residential property is returning. In real terms, using our estimate of the CPI in October to deflate nominal house prices, the decline in real house prices comes to approximately 10.6% from 11.5% in September.

Outlook: Important drivers of overall growth in the economy, such as the level of household income and debt, as well as the medium-term economic and financial outlook, are such that a quick turnaround in the housing market is improbable. There are signs, though, that house price declines are stabilising and that the economy is bottoming out. It does not appear, however, that house price growth will turn positive before the second quarter of 2010.
Standard Bank Residential Property Report

Property increasingly part of middle class investors' retirement portfolio
Rawson - South Africa
While some investors are holding back on property, many increasingly accept that two, three or more properties should form part of their retirement investment portfolio and that now is a good time to buy, says Bill Rawson, Chairman of Rawson Properties.

"Previously, investment of this kind was confined largely to people in the industry - estate agents, developers and builders - but now we find people from all walks of life investing steadily in property."

Ideally, Rawson believes, any property portfolio should be evenly balanced between commercial and residential stock, but right now the latter is the better bet because low and middle bracket homes are snapped up fast by tenants and rentals still rise annually, whereas retail, industrial and commercial properties are experiencing lengthy vacancies and having to accept reduced rents.

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