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| Regulator Will Ensure National Credit Act Promotes Fair Access to Credit |
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Concerns have been expressed that the National Credit Act (NCA) — which has been gradually enacted since 1 June 2006 and will come into full effect on 1 June 2007 — will hamper economic growth and housing development in unintended ways
Some housing developers fear that financial institutions will be setting unreasonably strict requirements for applicants to qualify for project finance, while others worry that the checking of the credit exposure of future borrowers required by the Act will be a protracted process that will slow down home-loan approvals, resulting in lost sales.
In response to these concerns, the National Credit Regulator (NCR), which was established by the NCA in June last year, gave the assurance that countering concerns through educating the credit applicants about their rights and the implications of the Act, investigating and solving complaints and settling disputes, were precisely what the Regulator has been tasked to do.
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It seems the sale of Cape Town’s Waterfront to an influential offshore consortium has reignited sentiment for the local property market
The most significant of the deals (and probably one spurred by the new ownership
developments at the V&A Waterfront) took place ‘just down the road’ with the Hospitality Group
paying R105 million for the 4-star Protea Hotel Victoria Junction.
The deal was struck at an
effective 10% discount to the R116 million value accorded to the property by independent
valuators JHI Real Estate.
It seems Hospitality Group have clinched a rather good deal with
forecast earnings from Victoria Junction penciled in at R6.8 million for the six months to end
June 2007 and R11.3 million for the full year to end June 2008.
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| House Price Growth Ends 2006 on a Lower Note |
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Property Trends
In December 2006 nominal house price growth of 13,5% year-on-year was
recorded in the middle segment of the market (see explanatory notes), down from a revised growth
rate of 14% in November. This brought the average price of a house in this segment of
the
market to about R857 400 at the end of last year. House prices were up by 15,2% in nominal terms
in 2006 compared with 22,7% in 2005 and 32,2% in 2004.
In real terms, year-on-year growth of
8,2% was recorded in November compared with a revised growth rate of 8,4% in October, based on
the headline consumer price index. Average real year-on-year house price growth of 9,7% was
recorded in the first eleven months of 2006.
On a month-on-month basis, nominal price growth
was slightly down at 0,9% in December
| Absa Group Economic Research, 10-01-2007 |
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| Municipalities Under Buyers Scrutiny |
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Homebuyers are familiar with many of the factors to be taken into account when choosing a property, but a new one to emerge in SA is the financial health of the local authority
In this respect, says Gerhard Kotze, CEO of the ERA South Africa property group, a recent survey by well-known credit rating bureau Global Credit Ratings provides some fascinating pointers to which metros in the country are likely to do better than others in terms of service delivery and good management.
"The survey, the first comprehensive analysis of its kind of the
country's 284 municipalities, resulted in the eThekwini (Durban) and Ekurhuleni (EastRand) metros being given the highest credit ratings."
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| 2007 Residential Property Predictions |
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2006 was a watershed year in the South African residential property sector, with trends that were already discernible becoming even more evident
An increasing swing towards smaller, more compact units: "In 2006," he said, "we saw developers responding as never before to demand
from the lower middle and lower market, in the process reversing the trend towards continually higher development prices. What is more, this movement is gaining momentum: we will see more of
these multi-unit affordable projects in 2007."
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| Future of South Africa Property Looks Positive |
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2006 was a relatively good year for property in South Africa, and even though the appreciation figures were not as high as previous years, some areas around the country have continued to outperform the national average
Elite and sought after suburbs in both Johannesburg and Cape Town have been faring exceptionally well. For example, according to Knowledge Factory's SAPTG statistics, Llandudno has seen a yearly growth of 38,06% for the year 1 November 2005 to 31 October 2006,
while Westcliff has seen appreciation of 51,58% during the same period. This trend is expected to continue, even with all the warnings of additional interest rate hikes. Absa's latest House Price Index notes that a nominal house price growth of 12,7% year-on-year was recorded in October compared to the revised growth rate of 13,5% in September. This brought the average price of a house in the middle segment of the market to R830 700.
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| Lower-Priced Houses Still Offer Best Yields |
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The growing wealth in South Africa’s leafy suburbs is now definitely trickling down to lower-priced neighbourhoods, including townships
Evidence to support this conclusion is that lower-priced houses continued to grow faster than those in the middle- and upper-priced sectors during the third quarter of 2006, according to the latest Rode’s Report on the state of the property market. The relatively stronger performance of lower-priced houses is confirmed by the FNB Residential Property Barometer for 2006:4, which shows that during the last year, houses priced under R500.000 performed much better than their more pricey counterparts.
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| Residential Market Still A Strong Bet |
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If interest rates increase marginally, the market should remain firm in terms of both demand and price growth
Real estate agents are expecting the residential property market to deliver a solid performance next year. Although the heady days of late 2004 — when property price growth peaked at more than 35% year on year — will not be repeated, estate agents are upbeat about property prospects.
Seeff Properties chairman Samuel Seeff thinks the market will have another good year “across the residential market”. But Seeff says the middle market, where units are priced between R1m and R3,5m, and which is dependent on buyers obtaining bonds to finance purchases, may have less growth than the top end because of the rising interest environment.
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| Foreign Property Investment Crucial |
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The sale of the landmark V&A Waterfront to a foreign consortium is likely to act as a catalyst to further foreign investment in South Africa
2010 has made foreign investment in South Africa property a viable
long-term investment that will benefit the country.
According to Alastair Collins, chief executive of Davis Langdon & Seah International's Global Board and managing partner of the International Group that operates throughout Europe, the Middle East, Africa, Asia, Australia and
the US, nothing is more topical or pertinent to South Africa than the sustainability of
international investment in its property.
"South African property is at centre stage," he say,
"and the Star Trek tractor beam of 2010 is a big draw."
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| Higher Interest Rates to Weigh on the Housing Market |
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Property Trends - Mortgage Advances
Volatility in
the rand exchange rate and international oil prices, together with increasing
inflation,
prompted the further increase in interest rates. PPI inflation surged to 10% in October
(9% in
September), while CPIX inflation came in at 5% in October (5,1% in September).
Other factors
which also contributed to the higher rates include record-high levels of
household debt as a
result of continued strong growth in private sector credit extension
(27,5% year-on-year (y/y)
in October), largely driven by mortgage advances growth of
30,9% y/y; the huge trade deficit
of R12,9 billion in October, which will contribute to the
current account deficit remaining at
a level of above 5% of GDP in the fourth quarter; buoyant manufacturing production and retail
sales growth, which confirmed that demand is still resilient; and relatively strong real GDP
growth (4,7% at a seasonally adjusted annualised
rate) in the third quarter.
| Absa Group Economic Research, 07-12-2006 |
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