Johannesburg - SA's housing slump is turning out to be far deeper and wider than originally anticipated, with property indices released this week sending a clear message that the country will no longer be able to avert falling house prices.
Earlier in 2008, property economists like Absa's Jacques du Toit and FNB's John Loos were still expecting house price growth to remain in positive growth territory in 2008 and 2009. Du Toit wrote in his monthly housing overview in January that growth in house prices may drop to as "low" as 9% in 2008.
However, latest data released by Absa on Friday show that house price inflation has already come to a virtual halt, with growth of only 0.3% recording in November year-on-year.
This has prompted Du Toit to lower his growth projection for the full 2008 to an average 4% (14.5% in 2007). Du Toit concedes that house prices are now bound to start falling before year-end or early 2009 - and he doesn't expect prices to recover noticeably before 2010.
FNB also recorded a sooner-than-expected dip with its house price index already falling by -0.2% in November. That is the first fall recorded in the seven-and-a-half year history of the FNB index.
Although Loos expected average price growth of about 5% for 2008 as a whole, he said house prices would stay in negative growth territory for 2009.
Said Loos: "The recovery in residential demand should be slowed by very weak economic growth and potential further job losses early next year, as the SA economy still battles the effects of the global financial crisis and lagged impact of high interest rates."
A 'market in pain'
The other two housing indices released this week by Standard Bank and mortgage originator ooba (ex-MortgageSA) show more erratic growth patterns. For instance, Standard Bank's median price index was up 13% in November year-on-year compared to a drop of -2,5% in October.
Standard Bank economist Johan Botha said the jump was not the result of higher house prices, but rather the outcome of fewer lower-priced houses financed by Standard Bank.
Ooba's average prices were flat in November on an annualised basis, but up 10.2% month-on-month from October. Ooba CEO Saul Geffen also attributed the sudden surge to a shift in sales volumes from lower- to higher-priced properties.
However, some industry players said that housing data coming from banks and mortgage originators do not reflect the full weakness of the market.
Rael Levitt, CEO of valuators and auctioneers Alliance Group, said SA's housing market had deteriorated so rapidly in recent months that statistical information coming from financial institutions was often outdated.
Real-time trends emerging on auction floors provided a more reliable picture of "a market in pain", said Levitt. House prices had come off sharply since September this year, he said.
The middle market priced roughly between R1m and R3m is experiencing the worst of times, with prices already falling by 20% to 30% this year in certain suburbs.
Levitt said this applied specifically to areas where a lot of new housing stock has been added in recent times. Vacant residential land is also problematic, with price falls of up to 60% year-to-date.
Distressed sales, where homeowners can no longer afford to repay their monthly mortgage instalment, have surged more than tenfold in the fourth quarter year-on-year.
Auction Alliance sold 420 distressed properties under the hammer in the first two weeks of November alone, compared to less than 40 sales for the same period last year. Most distressed sales are properties priced between R750 000 and R1.5m, said Levitt.
- Fin24.com