Standard Bank South Africa Home Loans Quarterly Report: Local property market remains constrained
29 March 2012

Standard Bank South Africa, the country's largest mortgage lender, released its first Home Loans Quarterly Report for 2012. The report shows that house price growth in South Africa remained fairly muted in 2011, and Standard Bank South Africa's median house price ended the year with negative year-on-year growth of 0.5% in December 2011. This indicates a sideways movement in South African house prices from the previous year. 

While South Africa's domestic economy rebounded slightly in the fourth quarter of last year, with growth of 3.2%, this came after two quarters of low growth. The economic outlook for 2012 also remains muted, largely due to the slowdown in the global economy. Housing prices are therefore likely to continue to mirror this sluggish environment for the period ahead. 

Steven Barker, Standard Bank South Africa's Head of Home Loans says: "While overall house price growth has been subdued, there are pockets of growth present in the market, specifically in the affordable and mid-income property segments. Housing prices in these segments have seen year-on-year growth of between 0.8 and 1.2 percent." 

In the residential construction market, overall building activity has seen a decline. "We see that the value of completed residential property declined by 3.3% compared to 2010," says Mr Barker. Most residential construction activity is centred in the country's main economic hubs of Gauteng, Kwa-Zulu Natal, and the Western Cape and Eastern Cape. 

"What is interesting is that recent residential construction seems to favour smaller dwellings, with close to 50% of all completed units last year being dwellings that are less than 80m2," says Mr Barker. 

"If you take this together with the price movements in affordable and mid-income housing, and decline in upper income housing, this indicates that households may be opting for smaller properties, which are more manageable from a cost perspective." 

Cost pressures are also influencing the rental market, with rental demand seen marginally on the up. While house rentals remained at the same levels as 2010, townhouse rentals grew by 1% and flat rentals by 3%. Annual rent fee increases are also being kept in check. "It would appear that landlords are containing rent increases to avoid pushing tenants into arrears, and ensuring that they keep a steady monthly cash flow." 

"It must be noted that the report does indicate that consumers remain under some pressure," says Mr Barker. "The purchasing power of consumers is being eroded by the steady incline in consumer price inflation, which registered 6.1% growth in December. Prices also continue to face upward pressures from rising food and energy costs, as well as administered prices." 

However, within this environment, while house prices have not seen high growth, estate agencies did note improvements in sales activities in 2011 in terms of numbers. 

Standard Bank South Africa saw an average 11% increase in mortgage applications in 2011, indicating improved sentiment. Over the past 18 months the Standard Bank South Africa mortgage book grew from R244bn to R275bn, and its total share of the mortgage market was 32% in December, up from around 27% a year previously. 

"The property market seems to show slight upticks, which are in line with a slow recovery. There is increased activity and greater stability in mortgage lending, as seen for example in the growth in Standard Bank South Africa's loan book, and this should provide greater liquidity in the residential property market. The current context, with low interest rates, positive household income growth, and house prices that remain off their boom levels, does provides an opportunity for buyers who can demonstrate affordability," says Mr Barker. 

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