Standard Bank Property Gauge: Sizwe Nxedlana – property economist, Standard Bank

MONEYWEB: Sizwe Nxedlana is a property economist at Standard Bank. Man, you've got bad news for us. It's not just South Africa where house prices are tumbling.

SIZWE NXEDLANA: No, no. We saw the median house price come down by -11.3% year-on-year.

MONEYWEB: What's a "median" house price?

SIZWE NXEDLANA: The median house price is the middle house price on Standard Bank's home loan book. The reason why we use it is because our home loans book is positively skewed. In other words, most of the mortgages we grant are between, say, zero and R1.5m, but we do get mortgages of up to about R30m. So, if I can give you an example, say we extended ten home loans, the first nine being R1 each and the tenth one being R10, the median or average house price would then be R1.90, where in actual fact Joe South Africa faces a house price of R1. So the median house price sort of takes care of those outliers.

MONEYWEB: R550 000 is the median price now; it was R620 000 June last year. Add an inflation of 11.7%, and that's a 23% real terms drop.

SIZWE NXEDLANA: Yes, OK, that's true, but there is a caveat. And a caveat, as I've previously explained, is that the year-on-year growth rates that we are seeing now are slightly exaggerated true to a base effect that was produced at the beginning of last year, so in the month leading up to the NCA. Basically what happened was that market participants had an incentive to prioritise and rush through more relatively higher priced deals, so that we saw a surge in the median house price and now we are not necessarily comparing the same sample with the same sample last year. So the median was exaggerated by that base effect. But that notwithstanding, what happened subsequently in terms of the adverse market conditions facing the consumer is also in those numbers. So some of it is the market in terms of prices actually falling, and some of it is just exaggerated by the base effect.

MONEYWEB: Sizwe, you said market participants rushed to get through deals. Does this mean that estate agents were twisting people's arms and saying: "Hey guys, get moving now, otherwise you mig4ht not get a bond in a month or so's time"?

SIZWE NXEDLANA: Well, maybe it was estate agents twisting people's arms, but I think there was just a lot of uncertainty at the time, if you recall. Last year people were uncertain of whether they would in actual fact qualify for the properties that they wanted to purchase, after the fact of ... implementation. So I wouldn't put the...

MONEYWEB: ...blame on estate agents?

SIZWE NXEDLANA: I doubt if they put a gun to your head for you to sign the papers.

MONEYWEB: They never do! That was Sizwe Nxedlana, a property economist at Standard Bank. Just to wrap up on some of the other interesting data on house prices, the cost of servicing a mortgage loan is now 36% higher than it was 24 months ago. In other words, if you were paying R3 000 a month two years ago, you'd now be paying R4 000 a month on the same bond. And it isn't just us who are suffering. UK house prices today were released for the month of June. They fell their largest rate in 14 years. And in Ireland, that housing boom that has been well documented all around the world has come to an end as well - tumbling house prices in Ireland. Also in the United States, prices on subprime, according to JP Morgan, will continue to fall. So if the housing market abroad catches the sniffles, we definitely in South Africa get a cold along with them.


Alec Hogg - Alec Hogg is a writer and broadcaster. He founded Moneyweb and is its editor-in-chief.

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