Middle segment price growth down

Middle segment price growth down
2008/05/09

According to the latest Absa house price index, released on Thursday, South African house prices in the middle segment of the market slowed to a nominal 6,8% year-on-year (y/y) in April from 7,8% y/y in March, taking growth to an eight-and-a-half year low.
This is also the fourth consecutive month of single-digit growth in nominal house prices since a growth rate of 11,2% was recorded in December last year.
The latest price is also the lowest since November 1999, when it was 6,5%, and brought the average price of a middle-segment house to about R974 in April this year.
In real terms, house prices in the middle segment of the market dropped by 2,5% y/y in March 2008, compared with a decline of 0,9% y/y recorded in February, based on headline CPI inflation.
"This was the biggest negative real year-on-year growth rate recorded in house prices since May 1997, when it was at a level of –3,4% y/y, based on nominal price growth of 5,7% y/y, and a headline CPI inflation rate of 9,5% at the time," noted the researchers.
On a month-on-month (m/m) basis, nominal house price growth was only 0,2% in April, unchanged from March. In real terms, house prices dropped by 1,3% in March from February. The real price of a middle-segment house has dropped by a total of R19,700, or 3%, from an all-time high of around R651,500 (at constant 2000 prices) in August last year to about R631,800 in March this year.
"Sharply rising CPIX inflation, currently at 10,1% y/y and mainly driven by international oil prices, rand exchange rate and food price trends, the 450 basis points worth of interest rate hikes since mid-2006 on the back of inflationary pressures, a significant slowdown in growth in real household disposable income in 2007 and the full implementation of the National Credit Act (NCA) in mid-2007, are factors having a negative effect on the affordability of housing," said the researchers.
They said these trends have caused the focus of homebuyers to have shifted from luxury, large and expensive properties to smaller and more affordable properties in recent times.
"As a result of these developments, the downward trend in year-on-year house price growth has accelerated since September last year. With inflation still under strong upward pressure, inflation expectations will remain high over the short term, which will have a significant influence on demands for higher wages this year," they say.
Against this background, the Reserve Bank's Monetary Policy Committee is expected to hike interest rates by another 50 basis points at the June meeting.
In view of these developments and expectations, house price growth is forecast to slow down even further in the rest of 2008 from current levels, says Absa.
Nominal price growth of well below 10% is projected for the full year, with real price growth expected to be in negative territory, which will be the first annual drop in real prices since 1999, when it was -0,3%. – I-Net Bridge

Middle segment price growth down

 

'No house price recession'

 

The residential property market faces a mild cyclical downturn, says Standard Bank. The market for cheaper properties has already picked up.

'No house price recession'

Overpricing is the real culprit

Overpricing is the real culprit
2008/05/05

Sellers, not legislation, nor rising interest rates or estate agents, was cited as an unnecessary major contributor to the residential property market's slowdown.
While it was an undisputable fact that the South African economy had become entangled in the global credit crunch, its effect on the market along with rising interest rates was "being largely overstated", says Jeanne van Jaarsveldt, marketing and finance director of RE/MAX of Southern Africa.
"Undeniably, the biggest sheet anchor on the movement of residential property right now is overpricing and this can be substantiated by the number of sales being concluded after negotiation on price."
According to the FNB property barometer, for the first quarter released earlier this week, the percentage of properties sold at less than asking price was 83% and 82% in the last quarter of 2007.
Van Jaarsveldt insists that it is important that sellers realise the slowdown in the South African property market was a direct result of financial fundamentals of a global nature and not part of a national conspiracy engineered by the Reserve Bank, the commercial banks or estate agents.
To blame the Reserve Bank was unfortunate as it was only exercising its appointed role of controlling inflation through the traditional tool of interest rate adjustments. It was also unfair to fault other market influences, such as the state, banks and estate agents. The reality was that South Africa, just as other international economies, had been snared into the global credit crunch, which was creating uncertainty and grinding down market confidence.
"In New Zealand we have seen residential sales plummet by more than half in the past month over March of last year while Britain's annual rate of house price growth in the first quarter of 2008 was 2,2%, down from 6,9% at the end of 2007. House prices slowed even more sharply in Northern Ireland where the annual rate of appreciation fell from 24,2% to –3,4%.
"Sales have also fallen in the US with prices flattening out while in Australia that country's national estate agent body heaved a sigh of relief almost audible enough to be heard in South Africa after its Reserve Bank held rates steady this month after hikes in both February and March which left home owners reeling from the accumulative effects of the increases."
Van Jaarsveldt urges both sellers and buyers to maintain perspective of the market and particularly it's strengths as opposed to exaggerating its weaknesses, which had become overly fashionable. Of importance, and this only applied to the South African market, was the continued emergence of the black buyer.
"Some commentators believe this source could run for 20 years before a burnout, but the importance of this feature is to understand that its former momentum has only been briefly stalled and will resume once affordability begins to improve among state employees."
Also pertinent, even in the current slowdown, house price growth was still increasing, admittedly of a slower nature. Sales in the lower end of the market were also still active, but to van Jaarsveldt, the biggest indicator underpinning a recovery was the lack of new building taking place.
The pace of new residential developments had slowed markedly with many developers at their wits end trying to successfully mix the cost of new building land and materials with affordability. Further shrinkage in new unit supply was inevitable and this, perhaps more than any single feature, would fuel second hand stock prices unrealistically when the market turned.
For more information contact Jeanne van Jaarsveldt on 021 761 1110.
Readers' Comments
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Interesting comment but he fails to point out that overpricing can only be in place if estate agents support it. It is either due to inexperienced, unsupervised canditate agents or the greed of experienced agents and the frenetic clamour that is deliberately created by some agents to cause confusion to potential sellers. - Tony Penfold

Overpricing is the real culprit

SA property hit by emigration

 

More SA homeowners are dumping their properties on the market for emigration purposes, with 12% of sellers planning to leave SA, says FNB.

SA property hit by emigration

Finance24
Monday, 21 April 2008 14:53:00

Property mkt still 'depressed'

 

Eighty-three percent of sellers have been forced to accept a lower price, while the average time that a house is on the market has risen to 12 weeks, statistics show.

Property mkt still 'depressed'

 

Finance24
Monday, 21 April 2008 13:54:00

Consistent sales in Sandton suburb

Consistent sales in Sandton suburb
2008/04/21

Sunninghill falls under the ever-growing Sandton, and is a very convenient locale to enjoy the promising future of a new CBD in the Greater Johannesburg area.
In addition, the following amenities are within easy reach of Sunninghill: Sunninghill Hospital, the Vodacom World of Golf, Montecasino, Fourways Crossing and Mall.
Month-on-month, Sunninghill has seen consistent transactions in the market, having transferred properties every month since January 2005 for both the free hold as well as the sectional title market. The market dropped to record lows of five transactions for free hold. Interestingly, this figure fell in January 2008 the latest recorded amount for the Sunninghill area.
Anne Mendelsohn, Seeff property agent for the Sunninghill area, says the market in Sunninghill is busy from a seller's perspective, "as we have double the amount of properties to sell in the area compared to the number we had last year".
Sectional title has performed marginally better having recorded 13 transactions for the month of January 2008, yet still the current state of the market is applicable to a trend seen throughout Johannesburg's higher-priced suburbs, as sellers are stuck on the market for longer periods than desired. This is due to a buyer's market that is hesitant in view higher interest rates and a post-National Credit Act (NCA) buying environment.
"There are buyers around but they are more particular and with more stock on the market it is taking longer to get an offer. Also, the offers are about 20% below asking price," adds Mendelsohn.
The average amount of transactions, taken on a monthly basis, was 14,54 for free hold and 34,83 for sectional title; these averages were recorded from Deeds Office data over a two-year period. More recent figures show that the number of transactions taking place in both markets are under two-year averages.
Yet the area remains popular with "younger yuppie buyers who either work as accountants or doctors/nurses", says Mendelsohn.
The rolling average, two-year price for free hold amounted to R1,400,278, and the average sectional title unit offering over a similar period was R693,647. The average free hold price can be seen to represent an almost doubling up on sectional title offerings.
In terms of sales revenue, the highest return was in August 2007, which witnessed R54,770,884 in total sales. - James Monteiro

Consistent sales in Sandton suburb

Keep the heat this winter

Keep the heat this winter
2008/04/21

Our home décor and DIY expert Janice Anderssen suggests an easy way to prevent your house or townhouse from feeling like an oven in summer and a fridge in the winter.
What is Aerolite?
Aerolite is manufactured locally according to technology from Owens Corning Toledo, USA. It is made from pure spun glass, bonded with an inert thermo-setting resin to form a strong, resilient, easy-to-handle blanket.
Aerolite forms a highly efficient thermal barrier which excludes solar heat gain in summer and retains heat generated within a building in winter. It reduces heat flow by up to 87% and can lower the temperature in summer by up to 5°C. What's more, Aerolite's insulation efficiency is unaffected by its orientation to, or the direction of, heat flow.
Aerolite is the only ceiling insulation in South Africa that does not burn - as it is made from fibreglass! This means it is the safest insulation you can buy.
Keeping cool indoors when it is hot outdoors is a problem. The sun beating down on our homes causes indoor temperatures to rise to uncomfortable levels. Insulated ceilings reduce the heat flow between the outside and the inside of your home, keeping it warmer in winter and cooler in summer.
In our hot summer months, up to 35% of the heat in your home enters through an uninsulated ceiling. If you have ever been up into your attic during the summer, you know yourself how hot it can be up there. Insulating the ceiling of your home should be a top priority.
Draught-proofing your home will also help keep the summer heat out. For example, seal windows and door bottoms with insulation strips.
Installing Aerolite
1. Measure the distance between the timber roof trusses.
2. Cut the insulation material - while it is still in the bag - to the correct width to fit snugly in the space between the roof trusses.
3. Roll out firmly between the roof trusses on top of the ceiling.
4. Wrap insulation around waterpipes so that they do not freeze in winter, and we recommend you also wrap the geyser for further savings on electricity bills.
Benefits at a glance:
- 30-year guarantee
- Saves money on electricity bills
- Does not provide sustenance for rats and mice
- Non-combustible
- Contains no asbestos or plastic fibres
- SABS tested and approved (SABS 1381 Part 1)
- Reduces condensation
- Mould-resistant
- Light weight
- Corrosion-resistant
- Maintenance-free
- Sound absorption
- Will add value to your home
- Available in mini rolls
For more information click here to visit the website.

Keep the heat this winter