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Johannesburg - The residential property market is expected to experience a relatively mild cyclical downturn rather than a full blown recession, says Sizwe Nxedlana, Standard Bank property economist.
The bank has also started to see increased levels of activity in the lower property segments, according to Leon Barnard, director of Standard Bank Personal and Business Banking Products. The upper most sector of the property market has cooled off the most.
The Standard Bank median house price index recorded negative year-on-year growth for the second consecutive month. The Standard Bank median house price fell to R530 000 in April from R550 000 in March. The April median house price of R530 000 rand translates into a growth rate of -8.6% year on year when compared to the median price recorded in April 2007.
The five month moving average growth rate declined to -2.8% year on year in April. However, these figures should be interpreted with caution before any assumptions are made, according to Nxedlana.
He says: "A relatively high base value from which the latest and pending year-on-year growth rates is calculated was established last year.
The establishment of the high base was primarily due to the temporary upward adjustment in the distribution of mortgages entering Standard Bank's home loans book in the months leading up to the introduction of the National Credit Act (NCA). The uncertainty preceding the implementation of the NCA incentivised the prioritisation and increased the urgency by market participants to conclude higher valued housing transactions in order to circumvent the possibility of stricter lending standards post implementation."
Decline in prices 'overestimated'
The distortive base effects may continue to impact the point estimates of the monthly median house price in May, June and possibly July suggesting further negative year-on-year growth rates in those months. The implication of all of this is that there may be an overestimation in the extent of the decline in house price growth.
Leon Barnard, Director Standard Bank Personal and Business Banking Products says: "Property remains the one of the best investments and over time has shown very good returns. There is no denying that South African consumers are starting to feel the pinch of higher inflation and the higher interest rate environment. There is also no denying that property prices have cooled off dramatically in the past few months as a consequence of these environmental pressures.
- I-Net Bridge