07 Jun 2013
The Standard Bank and FNB House Price Indexes for May show an improvement in house price growth but banks are wary of assigning double digit growth in 2013.
According to the May reports, the Standard Bank House Price Index improved by 10.3 percent year-on-year (y/y) from 9.8 percent y/y in April while the FNB index recorded 5.8 percent y/y from 5.4 percent in April.
The average value of homes transacted in the FNB House Price Index was R885 773 and the report reveals that in real terms, the index is -19.2 percent down on last decade’s real price peak reached in November 2007, while in nominal terms it is 14.9 percent higher.
Compared to May 2003, 10 years ago, the index is up 49.8 percent in real terms and 151.9 percent in nominal terms, suggesting that the price effects of last decade’s residential demand boom have far from worn off, despite a significant downward real correction since late-2007, says FNB household and property sector strategist, John Loos.
Meanwhile, the report by Standard Bank shows that the nominal index growth for freehold properties recorded an 11.9 percent y/y improvement in May from 11.2 percent y/y in April, while sectional title was down 5.8 percent y/y in May from 5.9 percent y/y in April.
Writing in the report, Standard Bank Home Loans property analyst, Sibusiso Gumbi says despite favourable interest rates, elevated pre-existing household indebtedness as well as tarnished credit records remain key stumbling blocks to a notably improved uptake in household mortgages, whose balances continue to post sub-3 percent y/y growth.
“Given slowing GDP growth, high unemployment and sticky household debt, one would be wary in assigning double-digit improvements in the house price index as a sustained trend,” he says.
Wouter Joubert, co-franchisee for the Rawson Property Group’s Strand franchise says they are achieving on average 12 sales per month of homes priced between R800 000 and R1.8 million.
Demand is reportedly strong in this price bracket with prices increasingly at approximately 10 percent annually.
Joubert points out that Strand offers buyers and investors good value for money and property priced right is sold within 10 days.
Buyers of properties priced over R1.8 million are getting between 80 and 90 percent home loans noting that prices are also starting to show an improvement from the lows of between 30 and 40 percent drop between 2009 and 2010.
Buy-to-let investors are raking in cash especially with sectional title properties priced between R250 000 and R450 000 as they get as much as close to 10 percent in returns allowing them to cover their monthly bond repayments from day one, he says.
Muller explains that its thanks to good schools in the catchment area that attracts buyers of homes priced between R1.6 and R7 million.
Traditional family homes in Rondebosch are often being bought and completely renovated to suit the new family’s needs, she says.
Figures from PropStats, the Institute of Estate Agents, Western Cape’s, property data service, show that y/y prices have increased from an average of R3 163 565 to R3 438 000, with the highest price listed at R9 750 000 (only on the market for seven days).
The average difference between asking and selling prices in Rondebosch in 2012 was 10.1 percent whereas this year it is at 7 percent at present, she adds. – Denise Mhlanga
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