Lit­tle to cheer about

For­get about mak­ing money on houses in 2011

Finweek English Edition - - INSIGHT -

DE­SPITE IN­TER­EST RATES drop­ping to their low­est level in more than 30 years, South Africans have yet to re­gain their ap­petite for res­i­den­tial prop­erty. In­dus­try play­ers say sales vol­umes are still roughly half of those recorded dur­ing the boom years, which means house prices are likely to show lit­tle, if any, growth this year.

In fact, some say it’s no longer if house prices will fall again this year but rather by how much. Lat­est data from SA’s ma­jor banks and mort­gage orig­i­na­tors show de­spite av­er­age house val­ues ris­ing by 6% to 8% on av­er­age last year as a whole (depend­ing on whether you look at Absa, First Na­tional Bank, Stan­dard Bank or ooba fig­ures) all in­dices were down to the low sin­gle-dig­its or fall­ing by year-end. Absa’s in­dex moved into neg­a­tive growth ter­ri­tory in Novem­ber (-1,4%), while ooba’s in­dex was down 2,8% in Novem­ber, the first fall in house prices recorded by it since April 2009.

Prop­erty econ­o­mists ex­pect price growth to weaken fur­ther over the com­ing months on the back of lin­ger­ing high debt lev­els, the prob­a­bil­ity of no fur­ther in­ter­est rate cuts and an un­cer­tain job mar­ket out­look.

FNB prop­erty strate­gist John Loos says it’s un­likely the mar­ket will be able to avert fall­ing house prices this year, as cash­strapped con­sumers sim­ply can’t af­ford to take on ad­di­tional mort­gage debt.

Loos fore­casts prices to drop by around -2,5% for the year as a whole. He be­lieves larger and more ex­pen­sive homes will take the most pain, while the smaller homes sec­tor should out­per­form as the trend to­wards down­scal­ing gains mo­men­tum. Says Loos: “Size is be­com­ing a key driver of home buy­ing de­ci­sions, as ris­ing op­er­at­ing costs – elec­tric­ity, wa­ter and mu­nic­i­pal rates – prompt con­sumers to opt for smaller prop­er­ties that are cheaper to run.’’

Absa’s fig­ures con­firm that trend, with prices of smaller houses al­ready ac­cel­er­at­ing at a no­tice­ably faster pace than medium and large homes last year. Be­tween Jan­uary and Novem­ber 2010, prices of small homes (80sq m to 140sq m, av­er­ag­ing R688 000) were up 14,7% com­pared with growth of only 4,5% and 3,5% achieved re­spec­tively for medium-sized (141sq m to 220sq m, av­er­ag­ing R951 000) and large houses (221sq m to 400sq m, av­er­ag­ing R1,4m).

Absa hous­ing an­a­lyst Jac­ques du Toit

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.