select
|

Weak rand unlikely to lure foreign property buyers - FNB

The substantial depreciation in the value of the rand against foreign currencies, which has made South African residential property significantly cheaper for aspirant foreign home owners, is unlikely to attract a higher number of foreign buyers into the market, according to FNB.

John Loos, a household and property sector strategist at the bank, said yesterday that the FNB house price index declined last month by 6.9 percent in dollar terms, 8.4 percent in euro terms and 3.4 percent in pound terms.

Loos doubted the significantly cheaper residential property prices for aspirant foreign owners would attract a higher number of foreign buyers into the market because it seemed the cheaper domestic house prices resulted from a deterioration of investor sentiment.

The latest FNB house price index revealed that the acceleration in nominal house price growth, which picked up early this year after a lull late last year, continued last month. The average house price grew by 5.8 percent year on year in May, compared with the revised growth of 5.4 percent in April.

The average value of homes sold in the index last month was R885 773.

However, real house prices, after adjusting for general inflation in the economy using the consumer price index, continued to show a slight year-onyear decline of 0.4 percent.

Evaluating the medium-term performance of the FNB house price index, Loos said the index in real terms was 19.2 percent lower than last decade's real price peak, which was reached in November 2007. In nominal terms it was a mere 14.9 percent higher.

But compared with May 2003, the index was 49.8 percent higher in real terms and 151.9 percent higher in nominal terms, which suggested that the price effects of the residential demand boom in the past decade had "far from worn off despite a significant downward real correction since late 2007".

Loos said despite the recent improvement, the outlook for the housing market was mediocre because of very disappointing gross domestic product growth in the first quarter, while slowing estimated total employee remuneration growth pointed to an economy under pressure.

This suggested a further slowdown in disposable income growth early this year, which probably largely explained the recent steady deterioration in consumer confidence, he said.

He said the other key event related to residential property demand last month was the Reserve Bank's decision to leave interest rates unchanged, thereby offering no additional demand stimulus.

"The combined impact of no interest rate cutting of late and slowing wage bill growth could have negative implications [for] growth in residential demand in the near term," he said.

It was questionable whether residential demand strengthening could continue at a time of such economic weakness, when there had as a result already been a steady slowing in growth in real consumer demand.

"A still slow rate of growth in residential buildings completed keeps supply growing at a slow pace," he said.

"But a weak economy and resultant weakened disposable income growth leads to the ongoing expectation that house price growth will continue to remain largely in single-digit territory in the near term, not far outpacing consumer price inflation of near to 6 percent."

Business Report


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 24 Apr 2018
      The thing about the property ladder is that at some point in our lives we all have reason to want to climb a rung or two higher. Sometimes, it’s because we’ve outgrown our previous dream home, or because we want to be in a better neighbourhood that’s closer to work or to schools. Sometimes it’s because our circumstances have changed, and we’re taking care of elderly parents or relatives. Sometimes, it’s just because we want a property that reflects the financial status our hard work has won.
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK