Guiding consumers since 2009

House prices increase gradually

By Staff Writer

 

The South African property market appears to be on the road to recovery with Standard Bank and First National Bank (FNB) revealing favourable year-on-year house price growth figures.
 
The Standard Bank House Price Index revealed a 9, 2% year-on-year growth in March this year, which was a considerable increase from the 6, 6% year-on-year growth it displayed in February. Standard Bank’s nominal index growth for freehold properties was 10, 2% in March from February’s 7, 2% year-on-year growth. The nominal index, pertaining to sectional title units, improved from 4, 9% in February to 6, and 4% in March.
 
FNB indicators also showed a growing residential market strength based on examining the house price data on a quarterly basis.
According to FNB’s household and property strategist, John Loos, FNB’s House Price Index showed a 2.2% year-on-year growth rate in March, lower than the 2.9% of the previous month, having followed a broadly slowing growth trend since a 7.7% peak in July 2012.
 
FNB’s growth rate figures were more conservative in March than Standard Banks’ and economists put this down to a discrepancy in sample sizes and different lending practises.
“However month-on-month growth is starting to accelerate in recent months, and I suspect it won’t be long before we have some improvement in this year-on-year growth rate.  Our 1st quarter FNB Estate Agent Survey pointed to strengthening residential demand and growing supply constraints,” says Loos.
 
Hiccups in house price growths
 
Despite a positive surge there are factors that hinder consistent growth in house prices. According to Standard Bank’s research strategist, Sibusiso Gumbi, subdued trends on the supply front (i.e. construction) may be a source of upside pressure in the House Price Index. “The real value of new residential dwellings constructed experienced a slow year-on-year growth improving only by 1, 9 %,” said Gumbi.
 
He added that January 2013 saw 2,760 new residential units being constructed, which was an 87 unit decline from the 2,847 units constructed in January 2012.
Home loan growth has largely been subdued over the course of 2012 and this has continued into 2013, with January experiencing a 2.9% year-on-year growth and February’s 2.8% year-on-year growth.
 
“Household mortgages continue to trail all other categories of extended household credit. Despite the most recent blip in house price growth, we are wary of assuming this as an overall trend. Pre-existing household debt balances in particular, which amount to 75.8% of household disposable incomes, serve as a notable challenge. The House Price Index is therefore likely to post only single-digit growth in 2013,” said Gumbi.
 
Loos echoed this sentiment saying that he still expects single-digit house price growth for the next few years. 
“The reasoning is that the household sector is still highly indebted and financially frail, our own economy looks set to grow mediocrely at best, and we expect an interest rate hike from later next year,” says Loos.
 
To fix or not to fix
 
Although Loos does not recommend fixing or floating rates to clients, he says the choice depends on the client’s financial strength and appetite for risk. 
 “If they do want to fix, they’ll probably get more attractive fixed rates now than they will once interest rates actually start rising. Fixed rates depend on market expectations of interest rates, and once the hikes have started those expectations deteriorate,” says Loos.
 
According to Loos it has been possible to obtain 100% loans for few years now, but many loans do still require deposits.
 “Loan applications are dependent on a combination of the client’s credit repayment record, affordability, disposable income and the quality of the property in question,” says Loos.

Recent Articles

Featured Get personal with your finances – and tie the knot

As time passes, your financial products may not live up to your needs. Therefore, it’s important to take stock of what you’re paying for and adjust where necessary. We got in touch with financial advisers to find out how you can get your finances in order, and what you should do to ensure you’re financially stable.

Personal loan or business loan? The best way to finance your business

When starting your own business, you may have to rely on external funding. Perhaps you qualify for a personal loan, but would it be better to take out a business loan instead? We got in touch with a specialist to find out whether it’s best to take out a business loan or a personal loan to assist you with your ongoing business or start-up.

What to do when you’ve been denied a home loan

After months of scanning property sites and attending showhouse after showhouse, you’ve finally found what you’ve been looking for. But your dream of owning a home comes crumbling down when you receive the news that you’ve been denied a home loan. So, what now?

Best travel cards offered by top South African banks

Planning a trip abroad involves a lot of administration. You need to consider travelling arrangements, reasonable accommodation, and a daily itinerary. But have you considered how you’re going to pay your bills once you arrive? Besides considering bank costs, you also need to consider exchange rates.

Deals

Takealot January Big Sale

Price: Available on request
When: Until 31 January 2020
Where: Online

Annique Restore Package Special

Price: From R600
When: Until 31 January 2020
Where: Centurion

Ster-Kinekor Senior Citizens Discount

Price: Available on request
When: Daily
Where: Nationwide