But coastal holiday homes still in doldrums - latest stats

House price growth in South Africa's cities shows the property market is trying to shrug off last year's recession, but coastal holiday towns and villages are still in the doldrums. That's according to figures released by a South African bank on Monday.

Latest research by FNB's property and mortgage market analytics department suggests house prices are going up even faster than we thought. Its book shows a revised 2.3% year-on-year inflation figure for December moving up to 3.1% in January. This is the third consecutive month of rising house prices, as measured by the FNB House Price Index.

FNB's home loans' analysts John Loos and Ewald Kellerman warn that the market is not yet "out of the woods". House price growth is still behind the pace of inflation. In real (inflation-adjusted) terms, house prices fell by not far off 4%, said the analysts.

Buying is predominantly for primary residences, it seems. An examination of Deeds data, said the analysts, "appears supportive of the view that the household sector is generally not yet on a firm financial footing, and is thus primarily focused on essential property buying as opposed to luxury buying. Volumes in high income major metro areas far outstrip those calculated for holiday coastal towns - which in fact still falling (-8.7% in November, year-on-year). Prices are still falling in these areas too, with FNB's figures pointing to a drop of about -0.8% year-on-year in the last quarter of 2009.

First-time buyers are increasingly returning to the market, the FNB Property Barometer - which canvasses estate agents' opinions - found recently. "From 14% of total buying two quarters ago, the percentage of first time buyers had risen to an estimated 19% by the 4th quarter of last year."

"This group probably benefits more than many others from banks' recent relaxation of deposit requirements on home loans, as these buyers are probably a low savings group even by South Africa's weak savings standards.Any economic recovery would also be positive news for this group, as many first time buyers are also relatively new entrants to the job market, a process that must have been slowed by the recent recession. This source of demand is typically more cyclical than the overall market, and it is expected to rise to a higher percentage of the total in the coming quarters," said FNB.

FNB believes interest rates are at or near the bottom. It does not expect property prices to rise by more than single digits this year because households remain "under significant financial pressure".

Article by: www.realestateweb.co.za