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Cape Town - Despite the low mortgage interest rate, many households’ ability to take advantage of the favourable trends in housing affordability continued to be affected by economic and household finance-related factors, according to the latest Housing Review by Absa [JSE:ABSP].
The report found that housing affordability was relatively stable in the first half of 2013, and is still remaining favourable compared with a few years ago.
The report looked at housing affordability as measured by the ratios of house prices and mortgage repayments to household disposable income.
The deterioration in consumer confidence in the third quarter of the year was more pronounced in the category of low-income consumers.
High unemployment, soaring transport costs, accelerating food price inflation and lost income during times of industrial action normally have a significant adverse effect on the financial position of these consumers, the report states.
It forecasts single-digit nominal price growth for 2013 and 2014 and moderate real house price inflation is projected over this period.
Levels of residential building activity showed a steady improvement on a cumulative basis in the first eight months of 2013 compared with a year ago, although a downward trend occurred from May this year.
Trends in the average price of new and existing homes show it was as much as R672 400, or 37.1%, cheaper to have bought an existing house than to have a new one built in the third quarter of 2013.
The volume of building plans for new housing approved by local government institutions increased by 7.1% year on year to 33 943 units in the period January to August.
This was mainly driven by the segment for flats and townhouses, which posted growth of 15.6% year on year over this period.
Construction
The construction phase of new housing saw a small contraction of 0.6% y/y to a total of 27 518 units in the eight months up to August from 27 694 units in the same period last year.
In the third quarter of 2013 building confidence improved somewhat further to its highest level since the third quarter of 2008.
The performance of the mortgage market remained subdued up to the third quarter of 2013 against the background of economic trends, the state of household finances, consumer credit-risk profiles, banks’ risk appetite and lending criteria, consumer confidence and residential property market conditions in general.
Growth in the value of outstanding household mortgage balances was relatively low at less than 3% y/y in the first three quarters of the year, to reach a level of almost R810bn.
On the back of the variable mortgage interest rate currently at a level of 8.5% per annum, monthly repayments on mortgage loans are in general 35.9% lower compared to early December 2008, when the mortgage rate was at a level of 15.5% per annum.
The continued low mortgage interest rate is beneficial to the affordability of mortgage finance, supporting the demand for housing and consumers’ ability to take up credit to buy property, according to the report.
Based on data published by Statistics South Africa, residential rental inflation remained relatively flat in the first nine months of 2013, averaging 4.2% y/y in the case of houses and 5.4% y/y in the case of both townhouses and flats.
- Fin24
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The report found that housing affordability was relatively stable in the first half of 2013, and is still remaining favourable compared with a few years ago.
The report looked at housing affordability as measured by the ratios of house prices and mortgage repayments to household disposable income.
The deterioration in consumer confidence in the third quarter of the year was more pronounced in the category of low-income consumers.
High unemployment, soaring transport costs, accelerating food price inflation and lost income during times of industrial action normally have a significant adverse effect on the financial position of these consumers, the report states.
It forecasts single-digit nominal price growth for 2013 and 2014 and moderate real house price inflation is projected over this period.
Levels of residential building activity showed a steady improvement on a cumulative basis in the first eight months of 2013 compared with a year ago, although a downward trend occurred from May this year.
Trends in the average price of new and existing homes show it was as much as R672 400, or 37.1%, cheaper to have bought an existing house than to have a new one built in the third quarter of 2013.
The volume of building plans for new housing approved by local government institutions increased by 7.1% year on year to 33 943 units in the period January to August.
This was mainly driven by the segment for flats and townhouses, which posted growth of 15.6% year on year over this period.
Construction
The construction phase of new housing saw a small contraction of 0.6% y/y to a total of 27 518 units in the eight months up to August from 27 694 units in the same period last year.
In the third quarter of 2013 building confidence improved somewhat further to its highest level since the third quarter of 2008.
The performance of the mortgage market remained subdued up to the third quarter of 2013 against the background of economic trends, the state of household finances, consumer credit-risk profiles, banks’ risk appetite and lending criteria, consumer confidence and residential property market conditions in general.
Growth in the value of outstanding household mortgage balances was relatively low at less than 3% y/y in the first three quarters of the year, to reach a level of almost R810bn.
On the back of the variable mortgage interest rate currently at a level of 8.5% per annum, monthly repayments on mortgage loans are in general 35.9% lower compared to early December 2008, when the mortgage rate was at a level of 15.5% per annum.
The continued low mortgage interest rate is beneficial to the affordability of mortgage finance, supporting the demand for housing and consumers’ ability to take up credit to buy property, according to the report.
Based on data published by Statistics South Africa, residential rental inflation remained relatively flat in the first nine months of 2013, averaging 4.2% y/y in the case of houses and 5.4% y/y in the case of both townhouses and flats.
- Fin24
Add your voice to our Property Issue:
* Write a guest post
* Share a personal story
* Ask the experts
