Hous­ing mar­ket hold­ing up

Financial Mail - Investors Monthly - - Opening Bell - Joan Muller

Over­all ac­tiv­ity in the hous­ing mar­ket re­mains sub­dued as most South Africans con­tinue to labour un­der high house­hold debt lev­els.

But it ap­pears there has been an uptick in sales to first-time buy­ers in re­cent months.

Data from mort­gage orig­i­na­tor Bet­terLife Home Loans shows that the per­cent­age of home-loan ap­pli­ca­tions from first-time buy­ers re­turned to pos­i­tive growth ter­ri­tory in the 12 months end­ing Septem­ber, com­pared with a de­cline of 3.9% in the pre­vi­ous 12 months.

“That in­di­cates that de­mand has risen quite strongly even though most house­holds are run­ning on a very tight bud­get,” says Bet­terLife CEO Shaun Rade­meyer.

He notes that the aver­age price paid by first-time home­buy­ers has also ac­cel­er­ated, ris­ing 5.8% to R739,000 over the same 12-month pe­riod. In­ter­est­ingly, the aver­age per­cent­age of the pur­chase price that first-time buy­ers are pay­ing as a cash de­posit has also in­creased in the past year, reach­ing 12.2% at the end of Septem­ber com­pared with 11% in the pre­vi­ous 12 months.

“The fact that first-time buy­ers are now man­ag­ing to save an aver­age R90,000 to put down as a de­posit speaks vol­umes about their re­solve to do what­ever it takes to buy their own homes,” says Rade­meyer.

Mean­while, FNB prop­erty strate­gist John Loos says per­cep­tions of fi­nan­cial stress in the hous­ing mar­ket ap­pear to be over­stated. The per­cent­age of home­own­ers be­lieved to be sell­ing to down­scale due to fi­nan­cial pres­sure stood at about 12% in the third quar­ter, mildly up from 11% a year ago.

Loos says banks’ non­per­form­ing loans show a sim­i­lar trend, with the aver­age year-to-date value of ar­rears as a per­cent­age of the to­tal value of mort­gage ac­counts sit­ting at 9.3%, up from an aver­age 8.5% in 2015. “Even these re­cently el­e­vated lev­els re­main far down on the 16% high recorded by banks in early 2009.” res­i­den­tial apart­ments in the R4m-plus price sec­tor, but they are now be­com­ing more con­ser­va­tive with their of­fered prices. We have also seen more stock com­ing onto the mar­ket — in fact at an es­ca­lat­ing rate over the past few months — which means that buy­ers now have more of a choice.”

Mauer­berger says last year the At­lantic Seaboard was short of stock and as a re­sult buy­ers were pre­pared to pay much closer to ask­ing prices. “We are now find­ing that buy­ers are at best pre­pared to pay be­tween 8% and 10% be­low the ask­ing price.”

Mauer­berger says the fre­neti­cism that char­ac­terised the mar­ket over the past few years is grad­u­ally sub­sid­ing, with a no­tice­able shift from a sell­ers’ mar­ket to more favourable con­di­tions for buy­ers. But he says sell­ers are un­der the be­lief that they can still get higher prices. “We are find­ing that buy­ers are sim­ply walk­ing away, rather than over­pay­ing.” in­dus­trial and re­tail — and on an over­all ba­sis.

The top spots went to Growth­point Prop­er­ties, At­tacq and SA Cor­po­rate Real Es­tate Fund re­spec­tively. Blue-chip mall owner Hyprop Investment­s won the award for best over­all port­fo­lio per­for­mance.

At­tacq achieved a re­turn of 16.5% for its of­fice port­fo­lio. The com­pany owns a R27bn port­fo­lio, in­clud­ing land­mark com­mer­cial and re­tail prop­erty investment­s and de­vel­op­ments. Wa­ter­fall City near Midrand, an­chored by the newly opened Mall of Africa, is its largest sin­gle as­set. Growth­point Prop­er­ties, the JSE’s largest SA-based prop­erty stock with a mar­ket cap close to R80bn was the best per­former in the in­dus­trial sec­tor, de­liv­er­ing to­tal re­turns of 18.9% for the three-year pe­riod, while SA Cor­po­rate’s re­tail port­fo­lio re­turned 18.6%.

Hyprop, which owns a R33bn port­fo­lio, in­clud­ing 16 malls across SA, Ghana, Zam­bia and Nige­ria, was the over­all win­ner, with a to­tal an­nu­alised re­turn of 17.1%.

MSCI ex­ec­u­tive di­rec­tor in SA Stan Gar­run says the awards are im­por­tant, as re­li­able data is vi­tal for in­formed in­vest­ment de­ci­sions and to drive con­fi­dence in the sec­tor: “Qual­ity data un­der­pins trans­parency, good sys­tems and good gov­er­nance.” He says ac­tive as­set man­age­ment such as de­vel­op­ing, buy­ing and sell­ing is also in­cluded in the per­for­mance cal­cu­la­tion.

Pic­ture: Se­eff

Beau­ti­ful Bakoven on Cape Town’s At­lantic Seaboard

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