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The SA Property Transfer Guide’s Property Clock, a graphic representation of the real-estate market, takes into account data such as interest rates, supply and demand cycles, finance availability, construction and rentals. Adjusted monthly, this quick overview of South Africa’s property market helps you make informed decisions.

 

MAY 2012: Knowledge Factory’s, SA Property Transfer Guide has kept its Property Clock unchanged this month at 21minutes to the hour. The Clock measures high-level national trends in the residential real-estate market. It retreated by five minutes in 2011 and has moved forward by one minute in March 2012.

Property Sector Analyst, Dieter Deppisch comments: “Riding into the second quarter of the year on the back of somewhat optimistic data may add an unexpected lightness to one’s step. FNB’s recent Estate Agent Survey came out with some mildly positive views of the residential property market. However, the happiness is tempered by the fact that Q1 is traditionally a strong period and affected by seasonality.

Some specific items of good news we noticed: (1) Sellers are a little more realistic in their pricing and estate agents reported that the number of sellers not achieving their asking price fell from 91% to 88%. (2) The average length of time it took to sell a property dropped from 17 weeks 6 days to 15 weeks 6 days. (3) The average concession sellers made on their asking price decreased from 13% to 11%. (4) A marginal drop in supply versus demand (5) OOBA reported a 49% y/y increase in the value of home loans approved in March.

While all of the aforementioned items are positive, do they bode well for the residential property market in general? That question can be answered only when one knows the following: (1) When will political pontificating translate into sustainable jobs (2) Will South Africa be able to accelerate its growth path beyond its current, mediocre 3% (3) Will effective measures be found for the frailties within SA’s largest trading partner – the Eurozone (4) How much risk appetite will our banks be prepared to swallow?

Notably we do not ask when interest rates will go up (or down). That’s because monetary policy has become largely reactive. This is clear when one tracks the repo rate and CPI over the past few years, particularly since the introduction of inflation targeting. Granted, the SARB maintains an eagle-eye on the contribution by exogenous factors to the rise in CPI, such as Brent crude and food prices.

Recently the SARB reported on trends with regard to real disposable household income, and it appears that the lower income groups may be faring worse than previously held. Indeed, it was also lower-priced homes (R300, 000-R500,000) that appeared to be doing better as a sector than their higher-priced brethren. Has the tide turned? Only time will tell.

For now interest rates are still low and growth of unsecured credit remains strong, increasing to 9,2 % y/y (from 7,9 % y/y). Economists forecast the repo rate rising by up to 200 basis points (2%) during 2013. If that is realised, it will certainly put a damper on home loans, affordability, debt-to-income ratios and the peripherals that drive the broader economy. Tough decisions in exciting times lie ahead!”

Tough decisions require unadulterated information. Knowledge Factory is committed to supplying sophisticated data to help buyers, sellers and property professionals make informed decisions.

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Article Courtesy of Dieter Deppisch

Property Sector Analyst

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