Selected News Article

SA FOLLOWS GLOBAL REBOUND

But sharp reversal of fortune unlikely

LATEST DATA FROM BANKS and mortgage originators suggest the worst is finally over for South Africa's ailing housing market following what's arguably been one of the most crippling property slumps this country has ever seen. While the house price indices of Absa, Standard Bank and First National Bank were still falling in August - down 3,4%, 5,2% and 7,2% respectively - the rate of decline has slowed for the second month running.
Mortgage originator ooba's data, which appears to react more quickly to market shifts, had already returned to positive growth territory in June and with a hefty 6,9% jump recorded in August (year-on-year).
While housing volumes (number of sales) are by most accounts still down 60% to 70% from 2007 peaks it appears SA will at least be spared the dramatic price falls seen in many other housing markets worldwide. The United States, Britain, Ireland, Denmark, Hong Kong, Singapore and Dubai count among those countries that have seen prices tumble by more than 20% from peak to trough. However, figures released last week by British property group Knight Frank show many of those markets, as in SA, are now also showing tentative signs of recovery.
Almost half of the 32 countries tracked by Knight Frank's global house price index recorded increases in second quarter 2009 on a quarterly basis. Liam Bailey, head of residential research at Knight Frank, says there are now clear signs house prices globally are starting to stabilise, with quarterly price falls accelerating in only seven of 32 countries in the three months to end-June this year.
However, more significantly is that not one of those countries saw prices fall by more than 10% in second quarter 2009. That's in stark contrast to the double-digit price falls still recorded by a number of countries in first quarter 2009.
Bailey notes even the US, where the sub-prime mortgage crisis started, is starting to see a recovery, with prices up 1,3% in the second quarter. That follows falls of 7% in each of the previous two quarters. An imbalance between supply and pent-up demand also helped Britain's housing market, which saw a price rise of 1,1% in the second quarter.
On an annualised basis, Israel is now the world's best performing housing market, with prices up 12,5% in the year to end-June 2009 (see table). Dubai is now the world's worst performing housing market, with prices down 47,3% over the same period. However, the decline here has slowed sharply over the past three months.
Bailey says it appears while the housing market worldwide remains oversupplied in many areas, transaction volumes have started to increase on the back of reduced asking prices and increased availability of credit. However, he cautions the market is still "fragile and patchy", with further price falls always a possibility while credit flows remain constrained as the global economy struggles to recover from the recession.
SA property economists have a similar view, warning investors and homeowners not to expect the double-digit price growth seen during the boom years to return anytime soon - if ever. Both Absa's Jacques du Toit and FNB's John Loos say the best SA can hope for is a gradual recovery to positive house price growth in the low single-digits by mid-2010.
Rode & Associates' Erwin Rode is not as bullish, saying even if nominal house prices in SA start to recover over the next few months, real house prices (taking inflation into account) are likely to decline for at least the next three to five years. Rode says the fact that house prices have risen much faster than incomes for many years has placed SA house prices well above their long-term trend line since 2004. "It will take a number of years for house prices to move back in line with incomes."

Joan Muller

25 Sep 2009 / FINWEEK 24 SEPTEMBER 2009