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Contraction in residential building activity continued in the early months of 2011
Absa - South Africa
In the first two months of 2011 residential building activity continued to contract on a year-on-year basis, but at a somewhat slower pace compared with late last year.

The total number of plans approved in respect of new housing declined by 5,9% year-on-year (y/y) in the months of January and February 2011, with the volume of plans approved in the higher-density segment of flats and townhouses rising by 5,5% y/y in the same period.

Higher-density residential developments are expected to be the main focus of the future demand for and supply of housing in South Africa, especially in the major and fast growing metropolitan areas. This will be driven by the affordability of housing, which will depend on building costs, the state of household finances, the cost of mortgage finance, and the availability and cost of vacant development land and municipal services.
Absa Building Stats

Affordable housing in demand
RealEstateWeb - South Africa
But Lightstone report shows there is not enough stock.

Demand for affordable housing in South Africa far outweighs affordable housing stock, particularly for properties with values below R200 000, where potential demand is in the millions. So says Lightstone property consulting, which recently undertook a survey to identify affordable areas in the country.

The chart below highlights the great demand for housing in affordable areas and particularly affordable properties with values below R200 000. It summarises the households that make up the population of South Africa by their respective income earning categories and maps these income categories to the value bands of property that would be affordable.
Real Estate Web

FNB Property Barometer
FNB - South Africa
As at the 1st quarter, it is very likely that housing affordability, as measured by the average house price/average remuneration ratio and by the instalment repayment/average remuneration ratio, continued to improve. This is due to anaemic house price growth, the likelihood of wage inflation being significantly stronger than house price growth, and a further decline in the average interest rate following a late-2010 interest rate cut.

However, affordability calculations are based on the wage growth of those employed, and after a major decline in formal sector jobs during the recession in 2008/9, recent employment growth remains very slow, and the household sector as a whole remains financially pressured. This pressure continues to be reflected in relative segment price performances. Most noticeable in this regard is that, when measured on a value band basis, the affordable area segment has shown the best price growth in recent times. The household sector also continues to be focused on basics, with coastal holiday town price estimates continuing to show significant deflation.

However, despite some difference in the relative performances of segments, virtually all housing segments that we measure have shown further deceleration in price growth during the 1st quarter. The exception is that of the "Sectional Title Less than 2 Bedroom" segment, which may have been buoyed slightly by the arrival of an increased number of 1st time buyers in recent times.
FNB Property Barometer

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