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FNB Property Barometer Residential Fixed Investment Review
FNB - South Africa
Residential fixed investment has been hard hit in recent years by the lagged impact of the 2008 recession and residential property market slowdown, which in turn was caused by a global recession along with significant interest rate hiking from 2006 to 2008.

The decline in overall residential fixed investment started back in 2007, and has continued unabated up until early in 2011, according to the Reserve Bank’s (SARB) data. It is not only new building activity that has suffered but the additions and alterations market too, and sometimes even home maintenance has fallen short.  The FNB Estate Agent Survey provides evidence to this effect. The sample of agents has been of the opinion that, since the start of the survey back in 2004, there has been a broad decline in the percentage of home owners undertaking “value-adding upgrades” or “maintaining and making some improvements” on their homes. From 79.5% of total estimated homeowners in early-2004, agents see homeowners falling into these 2 categories of home investment as having declined to 41.5% of total homeowners in their areas.
This implies a major shift by a significant portion of homeowners towards “lesser forms” of home investment, namely “fully maintaining with no improvements”, “only attending to basic maintenance” and ”letting homes get run down”. This is reflective of tough economic times as well as an ongoing obsession with consumption, by households, in order to maintain their material lifestyle in the short term.
FNB Property Barometer_Residential Fixed Investment Review _ Aug 2011

FNB Property Barometer Western Cape Property Market
FNB - South Africa
The 2nd quarter FNB Estate Agent Survey for the City of Cape Town brought about little in the way of fireworks, which isn’t entirely out of kilter with the rest of the country at present. However, the market hasn’t been without any improvements. Certain facets of it are indeed better, according to the agent survey, for instance an apparent improvement including buy-to-let buying as well as 1st time buying.

The very first question which the sample of agents surveyed is asked is how they perceive residential demand activity levels. This is a subjective rating, on a scale of 1 to 10, and our City of Cape Town agents have put the demand rating at an average of 5.57, very much in line with the national average of 5.61. The number is slightly down on the 5.71 level estimated for the 1st quarter survey, which was half expected due to seasonal factors. However, our economics team suggests that it may be more than merely seasonal, with the impact of the interest rate cuts late in 2010 starting to wear thin. Comparing our estate agent activity level rating with the other major metro regions surveyed, we see the City of Cape Town very much in the middle of the pack, significantly higher than Ethekwini, similar to Joburg and Nelson Mandela Bay, but significantly lower than the Tshwane rating. Nevertheless, while certainly not boom times, the demand rating remains considerably higher than the very weak bottom point of 4.21 reached in the 2nd quarter of 2009, which was just as the national recession was coming to an end.
FNB Property Barometer_Western Cape Estate Agent Home Buying Survey August 2011

FNB Property Barometer June Leading Business Cycle Indicator
FNB - South Africa
The June Reserve Bank (SARB) Leading Business Cycle Indicator showed a significant month-on-month jump to the tune of +1.8% following 3 previous months of month-on-month decline. In year-on-year terms, the Leading Indicator also saw its growth increase from May, although the rate remains low at +3.6%. The Leading Indicator is well-correlated to the residential mortgage market, with the growth rate in value of new residential mortgage loans granted usually closely tracking it.

The SARB indicated that 7 out of the 10 component time series that were available for June increased while 3 decreased. The largest positive contributions, it says, were from June residential building plans passed along with a notable increase in the 12-month percentage change in job advertisement space.  The major negative contributor was declines in prices of all classes of shares traded, along with the “interest rate spread”.
FNB Property Barometer_June Leading Business Cycle Indicator 2011


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