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Johannesburg - Building characteristics reflect far less exuberance in the post-2008/9 recovery, compared to the pre-2008 boom period and continue to point to a far more constrained household sector financial position.
A report from FNB says evidence of “exuberance” building in a residential market can often be seen in the characteristics of the residential buildings that are being built during certain periods, on top of looking at the overall level of building activity, house price growth and other indicators.
FNB examined data regarding building characteristics of residential buildings, grouped together by year in which they were built.
Interest rates
The bank said while it has seen a solid residential market since early-2012, building characteristics this time around have shown very little sign of major “exuberance” when compared to the early part of the 2000-2007 boom period.
The recovery in the residential market after the 2008/9 recession, driven by sharply lower interest rates and the resumption of positive economic growth, was accompanied by a slight increase in the average size of full title stands for buildings built in 2011 and 2012, after this average full title stand size reached an all-time low of 476m² in 2010.
However, the increase was minor and the decline in average stand size resumed in 2013, as affordability once again started to deteriorate.
The 2013 average Full Title stand size measured 517m² last year, a far cry from the 648m² recorded back in 2001.
However, the FNB report said, even back in the boom years early in the last decade, average stand size never really rose significantly. Urban land scarcity has been steadily increasing since the 1970s and real land values continue to rise over the long term.
Renewed decline
This has necessitated a long term trend towards greater densification, continuing largely unabated even through the 2000-2008 period of high exuberance.
Where the exuberance was perhaps more evident during the boom period, however, was in terms of building characteristics.
The average residential building size, according to build date, rose a very significant 143.8m² in 1997 to 182m² by 2001, before the house price boom precipitated a greater “affordability drive” and a renewed decline in average home size.
This time around, during the financially-constrained post-2009 recovery, the average residential building size rose by a lesser magnitude, from 133.9m² in 2011 to 153m² in 2012 and then quickly began to recede in 2013 to 144.5m² with affordability beginning to turn the corner for the worse last year.
Boom time
The financially-constrained household aector environment, and the drive for affordability, FNB says, is perhaps even more evident in the level of “luxuries” attached to residential homes.
As the 2000-2008 boom gathered steam, the percentage of homes with garages, according to build date, rose sharply from 52% in 2007 to 73.5% by 2002. This percentage then slumped all the way to 44% by 2010 and has risen only marginally to record 50% by 2013, but this is already slightly down from 2012’s 51%.
The percentage of homes with domestic workers’ quarters, too, at 10.96% in 2013 remained far down on the boom time peak of 18.4% back in 2001.
The FNB report says one of the biggest luxuries is perhaps the swimming pool, a feature that is steadily on a path to extinction in the modern South African home.
The post-recession residential recovery brought about a brief rise in the percentage of homes with a pool, from 9.9% in 2011 to 14.1% in 2012. However, very quickly as affordability started to deteriorate in 2013 we saw this percentage drop off to an all time low of 6.65% last year.
