Property sales and rentals rising

The real estate market showed further signs of recovery with an uptick in property sales last month and rentals this month.

Absa's house price index shows the average nominal value of small, medium and large houses rose 15.2% year on year last month. This resulted in an average house price of about R1.08-million in the middle segment after 14% growth in April.

Absa senior property analyst Jacques du Toit said: "Continued strong growth in the average value of smaller and more affordable housing is believed to be related to affordability issues.

"After a marked improvement in the affordability of housing over the past two years on the back of house price and interest rate trends, housing affordability appeared to have turned around in late 2009."

FNB's house price index for last month shows price inflation rising to 11.9% from April's 10.1% year-on-year growth.

FNB home-loans strategist John Loos says this stemmed from the 5.5 percentage point drop in interest rates since June 2008.

"But one must start to mention the contribution of an economy that is once again growing positively, and which in turn translates into somewhat stronger wage bill growth," he said.

Trafalgar's June rental index reflects a 7% rise in the nine months to March, but this was still less than the 11.2% rise for the year to last June and six-year annual trend of 10% since the start of the index in 2003.

"Once again property is showing its steady, compound returns for investors," said Trafalgar chief executive Andrew Schaefer. "The latest index covers the worst recession South Africans have experienced since the 1980s, yet on average rents rose in all cities."

Johannesburg and KwaZulu-Natal rental rates rose 4.25% compared with the 4.8% inflation rate. East London, at 14.3%, outperformed the rest of South Africa in the latest measuring period and the compound rental growth of 13% a year over six years.

"Households that would normally buy have been forced by poor affordability and high household debt to rent rather than buy," said Schaefer.

"This has underpinned the rental market. We have few empty flats in our portfolio."

Article by: By Zweli Mokgate -