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Mortgage advances - Absa
Absa - South Africa
Mortgage advances growth slows down
The year-on-year (y/y) growth in the total value of outstanding mortgage balances at monetary institutions, comprising both commercial and residential mortgage loans, slowed down to 3,4% in February 2011 from 3,8% in January. Month-on-month growth of 0,4% was recorded in February compared with 0,2% in January. These trends are based on data released by the South African Reserve Bank in respect of domestic credit extension.

Year-on-year mortgage advances growth is forecast to firmly remain in single digits in 2011.

Absa Mortgage Advances

FNB Estate Agent Survey - 1st Quarter 2011
FNB - South Africa
Summary
In summary, the FNB Estate Agent survey continues to suggest that the Middle and Lower Income segments are still performing better than the higher end segments. The High Net Worth segment remains very flat in terms of demand. The Upper Income segment showed some summer improvement in demand, but remained lower than the Middle and Lower Income segments. In terms of balance between supply and demand, as reflected in the average time of a property on the market, the Upper Income segment had the most pronounced increase in the estimated average time on the market in the 1st quarter of 2011. It was also the only one of the 4 segments not to have an improvement in the percentage of sellers selling in order to downscale due to financial pressure, as well as having the weakest estimated performance in the percentage selling in order to upgrade. The most marked improvements in market health in the summer months seem to have been in the arguably more interest rate-sensitive Middle and Lower Income segments. FNB Estate Agent Survey

Outlook for property worsens
RealEstateWeb - South Africa
Rising inflation, rising interest rates spell pain in all types of property.

JOHANNESBURG - Abandon all hope in property.

That is a rather brutal summary of the outlook for residential, commercial and industrial property described by First National's property guru John Loos and veteran property analyst Erwin Rode (pictured above) at a symposium in Johannesburg Tuesday.

Rode's conclusions for non-residential were:
"vacancy rates stubbornly high,
"nominal office rentals starting to recover,
"industrial rentals are drifting lower,
"builders' tender prices are still declining and contractors are struggling".
As to residential, Rode, who surveys virtually the whole property industry quarterly, says house prices and rentals are flat and "developers are in serious trouble".
RealEstate Web

FNB - Household sector debt service risk
FNB - South Africa
Summary - Household sector financial vulnerability remains high
Household sector credit quality has improved in recent years. However, this improvement has very little to do with any real improvement in the household sector's "balance sheet". Rather, it has mostly to do with massive interest rate cuts since late-2008, from a prime rate of 15.5% to the current 9%. This would be fine if we could guarantee that interest rates wouldn't ever rise again, but that is not the real world. Just yesterday, the Reserve Bank Governor, in her Monetary Policy Committee statement, while not moving interest rates was at great pain to emphasis that ""the risks to the outlook for inflation are on the upside". This implies "upside" risk for interest rates too, and many analysts including ourselves hold the expectation that the next move in interest rates will be up and that it will start late this year.

This is not particularly good news, because the household sector's vulnerability to interest rate hikes remains very high for the simple reason that its level of indebtedness remains very high. The SARB Quarterly Bulletin released this week told us that the household debt-to-disposable income ratio measured 77.6%, down from the previous quarter's 78.7%. While the decline was good news from a vulnerability point of view, the ratio remains extremely high by SA's historic standards, and has declined only moderately from the 82% high reached 3 years ago in the 1st quarter of 2008.
FNB - Household sector debt service risk