Market / Property News

Property Barometer – FNB house price index

by FNB – February 2013

In January 2013, the FNB House Price Index continued its mild short term dip. From a revised year-on-year decline of -1.1% in December, the index declined further by -2.3% in January.

The causes are believed to be threefold:

Firstly, a high base effect has come into play, due to a healthy price growth surge early in 2012 as the residential market showed significant strengthening at that stage. This has a negative impact on the year-on-year growth rate a year later.

Secondly, we appear to have seen relatively healthier transaction volumes on the lower priced end of the market, which has translated into something of a shift in relative transaction volumes in favour of the lower end of the market in recent time it would seem. That is not entirely unexpected as tough economic conditions drive the search for affordability.

Thirdly,we also saw a considerable deterioration in economic growth in the 2nd half of 2012, after a relatively good 1st half. This was caused by a lull in global economic growth at the time, along with major output disruption locally due to widespread industrial action, especially in the mining sector. As such, it is believed that very little economic growth took place in the 4th quarter, after a dismal 1.2% annualized growth rate in the 3rd quarter. This was bound to slow growth in residential demand somewhat in the latter stages of 2012 as household disposable income growth slowed too.

Property values on the rise

By Moneyweb, ooba – February 2013

The average house price reached R894,510 in January 2013, up 5.2% from R850,589 in January 2012. Month on month, the average house price increased 3.4% from R865,164 in December 2012, reports ooba, one of the largest bond originators in the country.

“The property market is gaining confidence and we expect property prices will continue to show positive nominal price growth for the year ahead,” says Rhys Dyer, ooba COO.

First time home buyer activity continues to drive the market, with over 51% of ooba’s applicants in January being first time home buyers. The average house price for first-time buyers was up 5.5% year on year to R686,452 and up 3.2% month on month to R665,167.

Despite the high number of first time home buyers, the average home loan deposit dropped 4.5% year on year and 5.7% month on month to R133,805, representing 15% of the average purchase price.

The average initial bank decline ratio decreased 4.3% year on year to 46.0% in January and the percentage of applications that were declined by one bank but approved by another improved significantly by 5.0% to 25.5%.

“That means one in four applications would have been declined had they not been originated to more than one leader,” says Dyer.

The market conditions are supported by the lower interest rate environment coupled with subdued property price inflation and improved lending policies, says Dyer.

He expects the current environment to persist for 2013.

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