The market, dependent on an improving economy and growth in household incomes, is slowly improving, with May’s FNB index at its highest since June 2010.

The residential property market is hard to call at present, with mixed signals coming from economists, analysts and real estate professionals — both in terms of the current situation and the forward outlook.

Absa Bank reports that mortgage bonds granted in April increased modestly compared with the previous month. In the household sector the value of outstanding mortgage balances, largely related to residential property was up by 2.3 percent in April (2.1 percent in March).

Outstanding household mortgage balances had a share of 64.5 percent of total household credit balances in April.

First National Bank’s Market Strength Index rose in May — the fifth consecutive month of improvement.

The bank’s House Price Index showed price growth of nine percent in May, slightly up on April’s 8.5 percent. Absa Bank’s senior property analyst Jacques du Toit reports that in April homes in the middle segment of the market for which the bank approved loans continued to deflate in real terms (after inflation). It also noted similar house price deflation in February and March. However, one must be aware that Absa’s calculations are based on homes (including improvements) priced at R3.6-million or less.

First National Bank property strategist John Loos, on the other hand, reports that the bank’s May House Price Index recorded the highest y/y growth since June 2010. This amounts to around two percent real growth after inflation, an encouraging sign.

"This means that since the real house price reached in February 2008, real house prices (those adjusted for CPI inflation over the period)… were 13.3 percent higher than February 2008," comments Loos.

"Compared to price levels at the inception of the FNB House Price Index back in July 2000, real prices were 70.3 percent higher as at March 2012, while nominal (before inflation) prices as at April 2012 are 231.7 percent higher," he adds.

What is worth noting is that FNB’s universe is based on homes valued at R10-million or less, suggesting that values in the middle and upper brackets of the overall residential market are indicating a better (by price) value band.

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