Whatshot

2026
2025
November
2024
June
April
2023
March
2022
2021
2020
March
February
2019
December
November
October
September
August
July
June
May
April
March
February
2018
December
November
October
September
August
July
June
May
April
March
February
2017
December
November
October
September
August
July
June
May
April
March
February
January
2016
December
November
October
September
August
July
June
May
April
March
February
January
2015
December
November
October
September
August
July
June
May
April
March
February
January
2014
December
November
October
September
August
July
June
May
April
March
February
January
2013
December
November
October
September
August
July
June
May
April
March
February
January
2012
December
November
October
September
August
July

Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2014-10-17
Most estate agents working in our local market can "feel" the current surge in demand we are experiencing as the number of enquiries and visitors to show days have increased and the length of time a property remains on the market and the difference between asking prices and actual selling prices have decreased. To provide some substance to this generally perceived buoyant mood of the property market it is instructive to consider the FNB Valuers' Market strength index. 

Just as Estate Agents are at the coal-face of the property market, Valuers are also ideally placed to pick up on changes in the relative demand and supply of property as it happens. Valuers as a group continue to perceive a rise in demand along with deteriorating supply. The scale of this index ranges from zero to 100 and a level of 50 indicates a balanced market where demand and supply ratings are equal. For the first time since August 2008, the FNB Market Strength Index rose slightly above the key 50 level. The demand and supply ratings are currently perfectly in balance. This is unlikely to remain the status quo for long as the demand rating is accelerating and the supply rating is contracting - one is moving up the other down - they just happened to be in equilibrium at the moment. 

The FNB House Price Index showed the 9th consecutive month of slowing growth in house prices - September 2014 recorded a 5,5% year-on-year growth, down slightly from the 5,9% recorded in August 2014 and down from the 8,5% year-on-year growth recorded in December 2013. If we however consider the way demand is surging and supply constraints developing, we can expect this downward trend in house prices to be reversed and move in the opposite direction soon. Although the market was surprised in January this year when interest rates were hiked by 0,5%, since then we have only had a marginal 0,25% increase in July. 

Our interest rate environment therefore remains exceptionally lenient and has been a factor in keeping our debt service costs at a low level. The forecast remains that interest rates will increase marginally from the current 9,25% to 10,25% by the end of 2015. For many home-owners with a mortgage bond this 1% increase in finance costs will be manageable. However depending on the overall debt burden the finance costs on motor vehicles and other household consumer durables adds up and a 1% increase can therefore translate into a more substantial monthly debt service level. The FNB Residential Property Report for September 2014 has identified our key downside risk for the residential property market to be our huge macroeconomic imbalance.

 Our imports exceed our exports by a large margin and we have been financing this through net foreign capital inflows. This capital chases high interest rates around the world and a sudden change in flows can have an immediate impact on the exchange value of our currency. A further Rand slide may force the SARB to increase rates in an attempt to limit imported inflationary pressures. Our mining industry makes up a relative small component of our overall economy but is a huge earner of foreign exchange. Disruptions through strikes in our mining and export sectors therefore have a direct impact on the value of our Rand. The link between striking miners on a Platinum mine and the interest you pay on your mortgage bond on your north coast property is therefore shorter than you may think.

For further information and an interactive analysis of this article follow my blog: andreaswassenaar.blogspot.com.

Andreas Wassenaar
Seeff KZN Chairman
Principal - Seeff Dolphin Coast