Whatshot
Property Talk
Property Talk
Narrowing the gap between demand and supply
House prices grew by 3,8% year-on-year in Oct 2019 according to the recently published FNB House Price Index report. This is the same as the prior month and marginally up from the 3,7%, 3,6% and 3,5% recorded in the three months to August 2019.
According to FNB, the market strength index shows a narrowing in the gap between demand and supply with a marginal increase in demand and supply slowing as fewer new properties are brought to the market.
FNB have noted some of the demand being attributed to bargain hunting by buyers in the middle to upper-priced segments as well as increased competition between mortgage lenders looking for market share.
The affordable market is where the current action has been with the FNB survey showing that the time on the market for this low end of the price spectrum is 6 weeks and this increases steadily as you move up the price curve to 20,5 weeks on average for properties above R3,6m.
For our high end in Zimbali being the R20m plus, we measure the time on the market in years rather than weeks or months. Most of the homes currently on the market within the R20m plus bracket have been on the market for two or more years. This, of course, is hopeless for estate agents who only earn income on success and the eventual registration of transfer of the property.
Mortgage lending has however increased by around 4,3% year-on-year and this is positive as it indicates the willingness of banks to facilitate transactions. The average loan to value ratio has also increased to 91,2% in the 3rd Quarter showing than lenders are asking for smaller deposits.
According to FNB the purchase of holiday homes has increased marginally to 2,5% of the total property transactions from a recent low of 2,3%. The higher prices in Cape Town have meant that prospective holiday home buyers have moved their attention to other areas such as KZN and PE. Let's hope the Dolphin Coast attracts those clients debating the relative merits of KZN versus the WC.
FNB report that rental inflation remains subdued with rental inflation now at 3,3% nationally, Rental inflation is still the highest in the WC at 6,6% versus the 1,8% recorded for Gauteng. KZN's rental inflation has been reported at 2,9% on average.
Key drivers of rental inflation include employment and wage growth, which currently remain flat to negative. Vacancy rates have edged upwards recently measuring 5,9% on average and this is up from 5,6% in the previous quarter.
This aspect we experience on the ground as estate agents where it takes far longer to place a tenant. Landlords can expect a property to remain vacant for 3-6 months in some instances and this reality has to be carefully weighed against the prospect of reducing rentals rather than escalating rentals to secure a tenant.
The value of continuous and uninterrupted tenancies cannot be overstated in the current market. Even in the Ballito market, which has been characterized by more rental demand than supply we have seen significant retreating of rental rates to meet the market demand.