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Absa Housing Review - Second Quarter 2011
Absa - South Africa

The residential property market
The residential property market is expected to continue to reflect developments on the macroeconomic, the household sector and interest rate front in 2011.

Demand and supply conditions with regard to new housing were reflected in a continued contraction in residential building activity up to the early stages of 2011. The conditions in and prospects for the housing market are expected to keep residential building activity under pressure for most of 2011.

Based on recent trends in house prices up to the first quarter of 2011, and expectations with regard to economic growth, employment, inflation and interest rates, which will impact household finances, nominal house price growth of between 1% and 1,5% in the middle segment of the market is projected for this year. Taking cognisance of this forecast for nominal house price growth and a projected average consumer price inflation rate of 5% this year, house prices are set to decline by between 3,5% and 4% in real terms in 2011.

Year-on-year growth in household mortgage advances will continue to reflect developments with
regard to the economy, household finances, banks' lending criteria, interest rates and the residential
property market. Against this background, growth in mortgage finance extended to the household sector is set to remain in single digits this year.
Absa Housing Review

South African property market corrections
RealEstateWeb - South Africa

Not as painful as the USA property market.
South Africa is experiencing a property market correction. The question is whether it is or has been on the same scale as has been experienced in the USA during the last 3 years. The American dream has in some states unfortunately changed into an American nightmare. Only a certain sector of the South African property market is experiencing a correction akin to the "American nightmare" of a devaluation of property value up to 50% and has predominantly been visible on two fronts.

The first area is in the buy-to-let market section and more specifically in areas with an average to low rental demand. This generalized statement needs however to be qualified even further to pinpoint complexes with a below par managing agent and/or a Body Corporate who has allowed a bad rental mix to develop over the last 4 years. Complexes where the house rules do not "control" the quality and the average rental income for the units, have been experiencing sheriff auctions which culminated in a drop of value of between 45% to 60% below present CMA (comparative market analysis) values.

The second area has developed around the affordability of credit / cost of servicing bonds, resulting in a high level of household debt to disposable income (due to high unemployment levels etc.)
Real Estate Web

FNB Property Barometer - April 2011
FNB - South Africa

FNB House Price Index year-on-year growth accelerates mildly
The April 2011 FNB House Price Index showed further mild acceleration in year-on-year growth on March's revised rate of 1.2%, to 2.2%. This is the 2nd successive month of mild acceleration in year-on-year house price growth, an event which we believe is the lagged result of a further brief flurry of interest rate cutting by the Reserve Bank (SARB) late in 2010. Those rate cuts caused a mild uptick in residential demand which may have been more than just the usual summer seasonal factors.

In real terms, however, adjusted for consumer price inflation, the year-on-year decline continues, to the tune of -2.8% in March (April CPI figures not yet available), given that nominal house price growth was well-below the higher 4.1% CPI inflation rate.

However, the FNB Valuers Market Strength Index suggests that our valuers have started to see further deterioration in the strength of demand versus supply during April, after a some small signs of stabilization in preceding months of 2011. This weakening in the market balance is the combined result of a further strengthening in the supply of residential stock on the market during the month, along with a weakening in demand, according to the valuers' combined opinion.
FNB Property Barometer

Absa Mortgage Advances -May 2011
Absa - South Africa

Mortgage advances growth remains sluggish
According to the South African Reserve Bank, the total value of outstanding credit balances in the country's household sector increased by 7,4% year-on-year (y/y) and 0,8% month-on-month (m/m) to a level of R1 127,8 billion in March 2011. Year-on-year growth of 7% was recorded in February this year. Total household credit comprises instalment sales agreements, leasing finance, mortgage advances, overdrafts, credit card debt, and general loans and advances.

Growth in the total value of outstanding mortgage balances at monetary institutions, comprising both commercial and residential mortgage loans, tapered off to 2,9% y/y in March 2011, which was the lowest year-on-year growth on record since 1966. On a monthly basis total mortgage balances were down by R1,6 billion, or 0,2%. With outstanding mortgage balances in the corporate sector having a share of 26,5% in the March total of R1 046 billion, a decline of 0,7% y/y (-2,1% on a monthly basis) in this component of mortgage finance contributed to the abovementioned record-low growth of 2,9% y/y in March this year.

Outstanding mortgage balances in the household sector, largely related to residential property, recorded growth of 4,3% y/y in March 2011 (4,1% y/y in February), increasing by R4,5 billion, or 0,6%, from February.
Absa Mortgage Advances

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