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gave the high­est av­er­age rat­ings of 6,34 and 6,02 re­spec­tively, for the two quar­ters up to and in­clud­ing the first quar­ter of this year which shows im­prove­ment on the pre­vi­ous quar­ters. The up­per in­come ar­eas also re­ported some de­mand im­prove­ment, with a rat­ing of 5,94 read­ing. The high net worth seg­ment recorded the low­est rat­ing of 5,45, show­ing a slight de­cline from the pre­vi­ous quar­ter. It is very en­cour­ag­ing that the lower and mid­dle seg­ments are show­ing in­creased signs of ac­tiv­ity as these mar­ket sec­tors were af­fected the worst by the re­ces­sion and the lack of ac­cess to fi­nance.

There has al­ways been a cor­re­la­tion be­tween build­ing costs and prop­erty prices and dur­ing the over­heated boom of the mid 2000s, house prices well ex­ceeded build­ing costs. This has how­ever read­justed and we are back to de­mand lev­els and prices ex­pe­ri­enced in 2001 and 2002.

In­fla­tion in SA has been at his­tor­i­cally low lev­els and this has had a ma­jor ef­fect as we have be­come used to dou­ble digit in­fla­tion which led to 15% to 20% year-on-year house price growth.

ABSA bank re­ports that the av­er­age price of small homes (80m² to 140m²) in Fe­bru­ary 2011 stood at R784 000, up 4,3% on Fe­bru­ary 2010. Medium priced homes (141m² to 220m²) was R982 200, up 1,5% on Fe­bru­ary 2010 while the av­er­age price of a large home was R1,15m, up 3,75% on Fe­bru­ary 2010.

Two ma­jor causes of the lower de­mand for res­i­den­tial real es­tate has been the high house­hold debt to dis­pos­able in­come ra­tio of 77% and the strin­gent mort­gage cri­te­ria de­manded by the four ma­jor banks as they try to ne­go­ti­ate their way out of a sea of delin­quent mort­gages and in­creased liq­uid­ity re­quire­ments placed on them. Bank mort­gage ad­vances are back at 2000 lev­els and may take some time to re­cover to lev­els we saw in the mid 2000s.

An­other find­ing from the FNB sur­vey that in­di­cates a pos­i­tive turn in the mar­ket is the fact that the num­ber of home­own­ers sell­ing to down­scale due to fi­nan­cial pres­sure de­creased from 28% in the fourth quar­ter last year to 22% in the first quar­ter this year, along with the fact that those sell­ing to up­grade in­creased across all four seg­ments.

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