HOUSE PRICE GROWTH 'TO PICK UP'

Nov 01 2007 02:28 PM
Johannesburg - Standard Bank's median house price index recorded a relatively firm growth rate of 10.2% year-on-year in October, the bank said on Thursday.
"This is a noticeable improvement on the single-digit house price inflation recorded in the previous two months," the bank in a statement.
During August and September the bank's median house price recorded a year-on-year growth rate of 5.7%.
The underlying momentum in residential property prices - measured according to a five-month moving average growth rate - was recorded at 10.1% year-on-year in October.
"Notwithstanding the increased volatility in the house price data over the last few months, we have maintained a view that the underlying macroeconomic environment remains strong".
Standard Bank said people had recently become negative about the residential property market because of concerns over being able to access mortgage finance due to new regulations in the National Credit Act and higher interest rates.
Higher interests rates caused a large increase in the cost of servicing a mortgage for a home loan.
The income required to qualify for a particular house price segment had also increased, said Standard Bank.
"This reduced affordability will tend to decrease the demand for residential property by consumers and may lead to a moderation in the growth of house prices."
The bank said high levels of household debt might also impact the ability of households to buy property.
Yet, resilient macro-economic conditions remained supportive of consumer spending and the residential property market.
"The resilient setting provides a powerful countervailing force and, despite tighter monetary policy, renders a soft landing in the residential property market the most likely outcome."
Standard Bank said the growth of the economy at a rate of 4.5% in the second quarter of 2007 was a good sign for the residential property market.
SA Reserve Bank statistics also indicated that the real disposable income of households increased by 7.5% on a seasonally adjusted and annualised rate.
"This was the fastest rate of growth of real disposable income in eight years."
The bank said household consumer spending and consumer confidence also remained positive.
Within this macroeconomic context, the bank said it expected growth more or less in the 5% to 10% range until the second half of 2008.
Thereafter, moderately higher house price inflation was expected to commence.
- Sapa

HOME FORECLOSURES SIGNAL RATE BITE

October 26, 2007
By Mzwandile Jacks
Johannesburg - The number of notices of sales in execution rose by two-thirds in June compared with the same month last year, indicating that interest rates were beginning to bite.Bank foreclosures as a result of mortgage holders failing to make their bond repayments had jumped to an average of just over 1 000 a month in June this year from 600 last year, experts said yesterday.John Loos, a property strategist at First National Bank Commercial, attributed the current rise in sales in execution to the interest rate hikes that were beginning to increase the risk associated with lending in residential property. Although the increase in sales in execution during this period was below the 2001 and 2004 figures, he said, it did not augur well for the near future. During 2001 and 2004, the figures were closer to 2 500 per month, he said.Historically, only about 30 percent of notices for sales in execution resulted in actual sales. Loos said this was because some mortgage holders managed to sell their property independently or made other arrangements to finance their mortgage payments.

"We could expect to see sales in executions rise to around 300 per month over the next year," Loos said. "Based on this conservative estimate, this would amount to R215 million worth of properties being repossessed each month, with the bank and owner likely to recover, on average, only 62 percent of the market value of these properties."But Andrew Watt, the business development director at Lightstone Risk Management, said the incidence of sales in execution across different market segments differed widely. Mortgage holders in the mid-market were "most feeling the effect of the interest rate rises", Watt said.

80% OF HOUSES SELL AT LESS THAN ASKING PRICE

October 30, 2007
By Roy Cokayne
Pretoria - Four out of five residential properties were sold at less than the asking price in the third quarter of this year, the highest number since the inception of the First National Bank (FNB) property barometer in the fourth quarter of 2003.The average selling time has increased to 11 weeks, with premium properties remaining on the market for an average of 12 weeks and lower-priced properties for about nine weeks before being sold.The previously buoyant township market has also been hit by this trend and has experienced a marked decrease in activity.Richard Angus, the chief operating officer of FNB Home Loans, said yesterday that the number of township properties sold at less than the asking price had increased significantly to 21 percent in the third quarter of this year from 8 percent in the same quarter last year.Angus said this indicated that sellers in the township market might have been asking unrealistic prices and, in line with the trend previously noticed in the traditional suburb market, were now having to adjust their price expectations."Property professionals also claim that there is an increasing trend in the ratio of sellers to buyers [in the township market], indicating that the market is becoming more of a buyer's market," he said.The barometer, a quarterly review of residential property market activity, is based on the perceptions and expectations of estate agents. Angus said overall residential property market activity was at its lowest level, with the exception of the period immediately after implementation of the National Credit Act (NCA).

This was despite activity in the market increasing marginally in the third quarter of this year, the first increase in activity levels this year.Only 3 percent of property professionals rated activity in the property market as "very active" in the third quarter.Angus said possible reasons for the low activity included seasonality and the implementation of the NCA, while market activity had been hampered by six consecutive rate increases between the third quarter of last year and the same quarter this year.He said the proportion of first-time buyers had decreased to 14 percent from 16 percent in July, shortly after the introduction of the NCA, and 20 percent in the second quarter of this year. But this was not an unexpected result following interest rate hikes and the implementation of the NCA, he said.Angus said buy-to-let had remained stable, at the lowest level of 12 percent of the market over the past two years. In the first quarter of this year, the buy-to-let market comprised about 21 percent of sales and was at a peak of about 28 percent in the first quarter of 2004.Angus said the outlook of property professionals remained positive for the fourth quarter of this year, despite these results.This positive outlook was possibly influenced by seasonality, with the fourth quarter traditionally positive for the residential property market. This was because many people relocated at the end of the year to start a new job at the beginning of the next year, he said.