Property Barometer - Residential affordability
FNB - South Africa
2014 may be the year in which home affordability starts to become a little more of a challenge, with slightly higher house price growth and a struggling labour market.
After 6 years of improving residential property affordability, 2014 could be a year in which this improving affordability trend is reversed mildly, and in which affordability becomes slightly more challenging. This is based on our view that 2014 will yield higher house price growth in a supply constrained residential market, interest rates will remain unchanged, and average employee remuneration will show weak growth in an economy not showing any significant employment growth.
The 2 factors then expected to be negatives for home affordability are a year of mildly faster house price growth in 2014, and struggling labour remuneration growth.
While economic growth looks set to be pedestrian yet again in 2014, our expectation of slightly more rapid house price growth, rising from an average of 6.8% last year to nearer to 9% perhaps in 2014, is based more on our perceptions of increased confidence in residential property, both from a mortgage lender and home buyer point of view it would seem, and mounting residential supply constraints. Building activity has remained slow for the past 5 years, and our FNB Estate Agent survey reports significant agent stock constraints, while FNB’s valuers too are reporting increasingly constrained supply along with gradually rising residential demand.
Expected house price inflation of 9% could likely exceed average wage inflation. According to the SARB Quarterly Bulletin. The Andrew Levy estimate for average wage settlements for the 1st 3 quarters of 2013 was 7.9%. This is slightly higher than the 7.6% estimate for 2012, but can it continue to accelerate under conditions of almost zero employment growth? We suspect not. StatsSA measures of employment and wage bill growth show employment growth in 2nd and 3rd quarters of 2013 now at very near to zero in a weakened economy, which one would expect to exert some downward pressure on wage increases in the near term.
Property Barometer - Residential Affordability
Court may order salary deduction to pay rent
IolProperty - South Africa
Where a tenant owes rentals, his landlord can obtain a court order that would compel the tenant's employer to deduct a specific amount from his salary to be paid to the landlord in installments.
This is referred to as an emoluments (salary) attachment order. The tenant would be given an opportunity to defend such an application and the court would investigate the tenant's circumstances before granting the judgment.
Can a court order a tenant to pay her rentals to a third party and not the owner/landlord with whom she entered into a lease contract?
Let us take the example of an owner of a flat in a sectional titles scheme who owed the body corporate. The owner failed to pay the monthly levy and the body corporate issued summons to recover the outstanding levies.
Residential yield review
FNB-TPN - South Africa
After slow house price growth from 2008 to late-2011 had allowed rentals to play some mild catchup with residential property values, resulting in rising gross yields over much of that period, a period of improved house price growth performance through 2012 and the 1st half of 2013 translated into a resumption of yield compression (decline).
However, TPN (Tenant Profile Network) surveys a year ago began to talk of growing supply shortages in the residential rental market, and it would appear that rental inflation began to accelerate last year, causing yields to once again start to increase in the 2nd and 3rd quarter of 2013. This once again starts to raise the attractiveness of residential property as an investment purchase mildly.
Summing it all up, Loos and Dickens believe it possible that “we may see some further mild increase in gross yields in the near term as rental inflation rises. However, this may not be a large increase, as house price inflation also looks to be accelerating.” They thus remain of the view that we’ll probably have to wait for the next significant jump in residential yields, which will probably only take place the next time interest rates rise, boosting rental inflation while subduing house price growth. And the FNB expectation remains for such an event to take place from 2015 onward, after another year of sideways movement in interest rates in 2014.”
Residential Yield Review
Cancelling a bond application can be expensive
Rawson - South Africa
Fairly regularly in the process of awarding mortgage bonds for home purchases, the banks will be faced with a situation in which, for whatever reason (usually a serious change in the applicant’s economic circumstances), the client will want to cancel the bond granted to him by the bank.
In these circumstances, says Mike van Alphen, the National Manager of the Rawson Property Group’s bond origination division, Rawson Finance, the bond applicant may well find that he has to forfeit the deposit paid on the property and, in addition, may be held liable for the estate agent’s commission and/or the conveyancer’s wasted costs.
The bond applicant may then often approach the bank with a request to review his application and decline the loan so that none of these costs will have to be paid (many property sale contracts make the sale dependent on the buyer receiving a bond).
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