SA's house prices are on the rise
Lightstone's repeat sales data shows house prices are moving up again

Although Lightstone's National Repeat Sales house price inflation is still slightly negative year on year, it appears that the House Price Index bottomed out at the beginning of 2009 and that house prices are actually now on a modest upward trend. Monthly house price inflation (which tracks the month on month house price trend) was up 0.24% from March to April. This continues the positive trend we have been monitoring since January and appears to confirm that recent house price growth has moved out of negative into modest positive territory. Given the volatility of monthly house price inflation, we have been cautious to confirm this positive trend, but four consecutive months of positive monthly figures gives us the confidence to confirm that house price are on the rise again.

Projecting forward to July, annual house price inflation is now effectively at 0% which suggests that we have avoided the major house price drops experienced in foreign markets. Nevertheless while the "normal" market appears to be recovering, there is still evidence of major house price pressure in distressed circumstances. The average discounts in the case of forced sales have increased from 15-45% at the beginning of the year to 25-50% currently.

With mortgage lenders having mostly accounted for their bad debt exposure and interest rates falling, there are signals that the appetite for lending is increasing which should stimulate both the "normal" and "distressed" markets. Hopefully the distressed discounts are also near their maximum. In fact, at the lower end of the market, the discounts are actually now decreasing.

On a segment level, the Affordable and Mid Value segments are both showing positive annual inflation this month, with the Affordable market reaching highest inflation numbers across all segments at 17%. Even in the Luxury and High Value segments, which are still negative year on year, the trend is upward.

The detailed performance of the different segments tracked is shown in more detail in the pages that follow.

Annual Inflation Table

COASTAL VS NON-COASTAL INDEX

Coastal v Non-coastal Annual inflation

Coastal Annual v Monthly Inflation

Non-coastal Annual v Monthly Inflation

FREE HOLD VS SECTIONAL TITLE INDEX

Sectional title v Free hold Annual inflation

Sectional tile Annual v Monthly Inflation

Free hold Annual v Monthly Inflation

Note: Monthly house price inflation shows the inflation rate of the most recent month and emphasises recent market performance. However, monthly inflation tends to be much more volatile than annual inflation trends and so conclusions about the future trend of annual inflation must be made with caution.

AREA VALUE BAND INDEX

Area Value Band Annual inflation.

Affordable Market Annual v Monthly inflation

Mid-value Market Annual v Monthly inflation.

High-value Market Annual v Monthly inflation.

Luxury Market Annual v Monthly inflation.

Note: Monthly house price inflation shows the inflation rate of the most recent month and emphasises recent market performance. However, monthly inflation tends to be much more volatile than annual inflation trends and so conclusions about the future trend of annual inflation must be made with caution.

PROVINCIAL INDEX

MUNICIPAL INDEX

Inland Municipalities Annual inflation

Coastal Municipalities Annual inflation

NOTE ON METHODOLOGY AND DATA

In contrast to 'average house price' indices, repeat sales indices provide a measure of the actual price inflation of houses that have transacted twice within a particular period of time. The main benefit of this is that it is less influenced by the mix of transacting properties. The repeat sales methodology is recognised as the premier methodology for indexing house prices and is used by many international residential property price indexers including the Office of Federal Housing Enterprise Oversight (OFHEO) in the United States.

All property transactions in South Africa are registered in the Deeds Office and each record contains the legal details of both the property and the transaction. For the purposes of the Repeat Sales Index for residential properties, the following transactions have been excluded: farms; any transactions which may be of a development, commercial or community services nature; new developments; sales made in execution of a judgement; non-arms-length transactions; transactions where the inflation is extremely different to the norm of the statistical distribution of inflation rates; and township transactions

* Andrew Watt Director, Lightstone

Article from: www.realestateweb.co.za