A stronger than expected average house price growth for last year and an easing on upward interest rate pressure has prompted Absa and FNB Commercial Banking to revise their earlier average house price growth forecast for the current year to a higher level.
John Loos, economist at FNB Commercial Banking, has raised his earlier projection from a single digit estimate to an 11,6 percent average for 2007. Jacque du Toit, senior economist at Absa, has weighed in with a more modest upward revision to a level just short of double digit figures. Both economists admitted some surprise at the 15,2 percent average price growth recorded last year over that of 2005. Loos had expected around 12 percent and Du Toit around 10 percent.
Further good news for the property market is the diminishing prospect of further interest rate hikes mainly as a result of December’s inflation and producer price index steadying and the oil price and exchange rates both reflecting better stability.
However, Du Toit still expects a further 50 basis point increase in February, but now believes this will be the peak in the current upward cycle. Thereafter he forecasts rates holding steady for the rest of the year and a gradual upward trend in price growth on the back of lower rates next year. Loos is also forecasting a gradual turnaround in 2008.
Prospects of a higher than expected house price growth this year is also being supported by activity levels remaining strong throughout the recent holiday period. Du Toit confirms Absa lending volumes as “relatively strong”, but with a shift in focus from the more luxury and larger properties to medium sized and cheaper homes.
But this is not being borne out by the large number of big-ticket north coast sales during the holiday period. Wakefields Estate Agents, the éLan Group and Zinkwazi Lagoon all report good trading with the latter development recording an interest surge in its super luxury bracket. Dominique Coetzee, manager of the marketing team for the R256m development says all eight prime sites with an estimated selling price of R6,5 million had not only been reserved with deposits, but demand had been backed up by a long waiting list. By comparison, the project’s cheaper units with a kick in price of R2,5m, while interest had been good, had not witnessed the same degree of interest.
The Simbithi eco-estate, north of Ballito, also enjoyed a good run recording a sale a day, either of freehold sites or apartments throughout the holidays. According to eLan National Sales Manager Andrew Thompson, 14 units were sold at a combined value of R42,5m and 26 sites at a total value of R22,3m. This takes Simbithi to 93% of the available sites having now been sold. Estate Manager, Iain Laing, reported that more than thirty homes are under construction on the Estate, with a host of plans presently under review.
Wakefields Estate Agents report plenty of interest and “many” site reservations in The Executive in La Lucia, where 56 sites with price tags of R1,9m to R3,5m were launched in the last quarter of 2006. At Mt Edgecombe Country Estate Two, prices have recently “gone through the roof.” On average homes that were priced at R2, 9 million in July 2006 are now in the region of R3, 7 million.
At the Pearls of Umhlanga, all units brought to the market so far have been sold. Prices range from R1,9 million to over R12 million.
At the Hawaan Forest Estate, launched in the last quarter of 2004 by Wakefields, in Umhlanga, over 60% of the sites in phases 1 to 4 have been sold totalling just under R100 million. Nine houses are being built and another 20 to 25 sites will be opened for building purposes in the next three months.
But the high activity levels are not just a phenomenon of KZN. Seeff reported this week its highest record month in December 2006 with a national turnover of R750m in residential sales, excluding development activity. The trend was holding firm into January with the group reporting a 21 percent increase in sales over January 2006. Remarkably this January’s sales were based only on the first 11 days of the month.