Property Talk

Ethekwini has outperformed the other major metros

The latest FNB Property Barometer provides excellent insight into our national and regional property markets and specifically indicates that the Ethekwini metro has outperformed the other major metros nationally mainly due to the strong growth of the Umhlanga Rocks node.

The interesting year-on-year house price growth figures published across the metros show Ethekwini growing at 5,2%, Ekurhuleni following at 4,3%, Johannesburg at 2,6%, Tshwane at 1,5% and Cape Town at a pedestrian 0,5%. The time on the market before a sale is achieved has improved over the past year for the Ethekwini and Johannesburg metros.

As in any asset market, the pricing is driven by the demand and supply forces. For our property market, the supply side is impacted on by sellers withdrawing their homes from the market anticipating waiting for the market to recover on the one hand and by new stock coming on stream from new large-scale developments.

Emigration related selling has impacted on the supply side as people are forced to liquidate their South African properties prior to their date of departure. In some instances, sellers who are emigrating and fail to realize a sale may make their homes available as rental opportunities and therefore drive supply in the rental market.

On the demand side, lower prices drive increased bargain hunting as properties demonstrate increased perceived value. More importantly, however, is the improvement in mortgage lending which has averaged 4,3% year to date versus the 3,4% year-on-year for the same period last year.

This is the single most important driver of a property market and it is significant that the mortgage extension growth rate is exceeding the general house price growth rate. In terms of the most active price brackets, the very low and very high brackets have performed poorly but the highest growth rate came from the R700,000 to R1,800,000 bracket which recorded a 5% growth rate, followed by the R1,8m to R3,5 bracket with a 2,4% growth rate.

The near term prediction is for further monetary policy easing with a reduction in interest rates by 0,25%. The Reserve Bank Monetary Policy meetings are scheduled for 17th September and 19th November providing for two remaining opportunities for an interest rate reduction for this year.

With mortgage providers displaying a more aggressive appetite for lending money and the cost of money expected to come down further, we can expect the trend in the growth of mortgage extensions to continue.

This is good news and will hopefully act as a catalyst to drive demand in our property market. The rebound of GDP growth in the second quarter to 3,1% is encouraging and should this be followed by similar growth in the third quarter we would expect a significant improvement in our residential property market.

Consumer and Business Confidence can be expected to improve and with overall sentiment improving can be expected to drive the higher end of the property market, including our local markets of Zimbali Coastal Resort.

It has been a tough time for those people who service the property market, but there is light at the end of the tunnel.