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: 2014-12-26
Timing is important in property investments. The movement in house pricing does however follow a cyclical trend and if we can determine the point within that general trend at any given time, and know and understand the key macro-economic factors that have an influence on residential house prices, we can start to anticipate what the future is likely to deliver. There are going to be those external shocks to the system from time to time, such as experienced in 2007/8 during which the global financial crisis had an immediate impact on demand for residential property within South Africa, but even during these times a good property has underlying value and will remain in demand. If you like the idea of being a student of property economics, then having some insight into the following 14 key macro-economic factors provided periodically by FNB will go a long way to assisting in getting your property investment timing right:

  1. Real Disposable Income Growth vs Real Economic Growth - having fallen off a cliff in 2007/8, with big negative figures posted in 2009, a rapid recovery occurred in 2010. However since 2011 the growth trend has been downwards on both counts with real disposable income growth peaking at 5,74% and now hovering around 2%. Real GDP growth has declined and is closer to 1%. General house price growth has therefore not been supported by an expanding economy.
  2. Household Debt to Disposable Income Ratio - having fallen from its peak of 83% to its current 73,5% this indicates that households have strengthened their balance sheets and future capacity to buy.
  3. Interest Rates - At 9,25% the prime interest rate is still at historically low levels and even though the interest rate cycle has changed to an upward trend the peak is expected to be lower than experienced historically. The cost of capital therefore supports property buying.
  4. Agent stock constraints - Stock shortages across certain price brackets have increased with 21% of estate agents currently reporting stock shortages - supply constraints will feed through into higher prices.
  5. Full Title Property Replacement Cost Gap - this is the difference between the cost of new builds and the cost of existing stock. Currently at 21,7% in favour of existing stock, meaning that new builds on average cost that amount more. This will limit the amount of speculative off-plan purchasing and allows for a more balanced normalized market.
  6. FNB Valuers Residential Market Strength Indices - currently showing that on average demand has exceeded supply for the first time since 2008. This points to growing demand and will translate into higher prices.
  7. Average time that a property is on the market - currenty at 11,4 weeks on average and following a downward trend and heading towards the 8 weeks benchmark , which defines a buoyant market.
  8. Proportion of properties sold at less than the asking price - currently at 86%, marginally down from the prior two years but remaining relatively flat, thereby indicating that sellers remain negotiable.
  9. Average percentage drop in asking price to achieve a sale - currently at minus 8% and representing a consistent improvement from the minus 13% in 2011.
  10. FNB House Price Index Growth - currently at 7% and having reversed the downward trend, indicating that future price growth rates could accelerate.
  11. Affordability of Housing - measured using average house repayment value relative to average labour remuneration, the trend has been significantly downwards meaning the home ownership affordability has increased substantially.
  12. First time buying activity - currently at 26% representing an upward surge since 2008 and indicative of a more buoyant market with finance that is readily available.
  13. Proportion of buyers buying to let - currently at 9% and only marginally up from the low of 7% experienced over the past few years, indicating that it remains a great time to invest in rental yielding properties.
  14. Transfer Duty Revenue Growth - currently at 28.61% indicating a sustained improvement in the level transferred sales and proof that we are seeing a significant improvement in the property market.

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

andreasw@seeff.com