Doing their Homework

Banks flood the market with good news about a fast-changing market

Competition among banks for the R500bn mortgage market has potential investors and developers swimming in a sea of research data. And most of it is good news.

For instance, last week's Standard Bank "Residential property gauge" provides a detailed picture of South Africans migrating from country districts to cities - and up the economic ladder.

The number of South Africans owning traditional huts has declined dramatically from 19% of the population in 2000 to 12% in 2005. The number of people occupying squatter huts has grown by 613 000 to 6% of the population since 2000.

What's even better news is that the data gives impetus to housing minister Lindiwe Sisulu's bid to eliminate informal housing within a decade. This despite the enormous task of providing proper housing for more than 3m people.

SA's biggest residential lender, Absa Bank, has for a decade been the lone supplier of vital information on trends in residential property. But First National Bank (FNB) launched a quarterly "Property barometer" just over a year ago to compete with Absa's monthly "House price index" and quarterly review of the residential market. Standard Bank soon followed with its "Property gauge".

All are serious research documents that deepen their readers' knowledge of the property market and improve confidence in the sector and SA's future. For instance, FNB last month produced a detailed analysis of the township markets to show that prices were taking off in many areas (Property February 3).

The Standard Bank data also shows that while 6% of householders occupy squatter huts, 7% of house owners own such huts. This indicates that home ownership is highest at the lowest economic level.

The number of people occupying houses has grown from 71% to 74%. Those owning houses are up from 64% to 68% - an extra 2m people. The same proportion of the population as live in squatter huts - 6% - now also live in flats (see graphics).

Each bank has its own market research methods. FNB's "Property barometer" measures estate agents' current assessment of the market, making it something of a leading indicator. Absa has a long history of prices and affordability data based on properties it has mortgaged over decades, and it gives the current market situation. Standard Bank relies heavily on deeds office and Reserve Bank data for thorough research that is between three and six months old.

And the first signs appeared last week that similar information could soon be provided about the commercial property market, which is in a rapid upswing. Nedbank's commercial property finance division launched what is likely to be the first regular report on commercial property. It concentrates on lending, but its information on the growth of lending and the market share of all lenders gives a good indication of where the commercial market is headed.

Nedbank's market share slipped from about 35% to 30%, but it is still ahead of the pack and its lending grew by 5%. The share of Absa, at number two, also slipped slightly, but its lending grew by 45%. Big gainer was Investec, whose market share has grown from 10% to 15% with lending increasing by 65%.

Expect other banks to follow soon with their regular reports.

Article from: http://free.financialmail.co.za