Home Loan Market News:
Standard Bank Home Loans
Standard Bank's property book for the first ten months of 2009 revealed an average monthly decline of 4.3% in the median home price.
This brings the number of monthly declines to 17 onsecutive months. The October smoothed data yielded a rate of contraction of 4.6% y/y, improving slightly from the declines recorded in August and September There are signs that the residential property market is stabilising and that interest in residential property is returning. In real terms, using our estimate of the CPI in October to deflate nominal home prices, the decline in real home prices comes to approximately 10.6% from 11.5% in September.
The smoothed growth rate for October shows that the value of the median residential properties financed by Standard Bank was R553 000 Although price declines are continuing, the declines have stabilised at around -5% y/y. What is more interesting from our perspective is that that potential buyers are returning and that the loosening of credit criteria announced at the beginning of September is showing some results in terms of the number of loan applications and loans granted in October.
We also see first time buyers making use of the opportunity to test the market, while the loosening of the loan-to-value constraint is increasing the demand for lower priced properties. This is in contrast to our experience from November last year to August this year, when the median price of properties financed increased. Conversely, the increase in appetite for lower-priced home s is biasing our raw median price downwards.
Of course, improvement in the macroeconomic environment, all be it quite tentative and fragile, will also start to support the property market, but it is unlikely that it will perk up before more convincing signs of a substantial and sustainable upswing emerges.
A slightly improved macroeconomic outlook.
The accumulated 500 basis points cut in lending rates since December last year had an immediate impact on the affordability of debt, while the ripple effect of the cuts will in due course support the economy. Further evidence that the economy may be bottoming out is provided by growth in retail and car sales; an uptick in the components of the Purchasing Managers Index (PMI); mining, manufacturing and electricity output; gold, platinum and oil prices; business confidence; and the leading indicator of the South African Reserve Bank.
GDP data for the third quarter of the year will be released later this month and is projected to show that the economy is pulling out of the recession. Looking forward, we anticipate that an improved second half of the year will leave growth for 2009 at -1.5% y/y.
Nonetheless, with output falling to the extent that it has, unemployment soared. It is estimated that almost one million South Africans have lost their jobs since the beginning of the year.
An immediate improvement on the employment front is also not on the cards given that unemployment is a lagging indicator of economic activity, meaning that even with a turnaround in economic growth, employment will remain weak for an extended period of time.
Clearly, the combination of a struggling economy, job layoffs and falling home hold income is negative for the housing market. Appetite for credit also plunged through the year.
The latest data (September) show that growth in credit extended to the private sector collapsed to only 1.5% y/y, and may in fact fall into negative territory over the next few months. Growth in mortgage loans also showed a steady decline to 4.8% y/y in September from 5.5% y/y in August. More positively, with the pace of credit impairments likely to start moderating in the second half of the year, we anticipate the weakness in the broader financial sector to dissolve.
More : Home Loan Market News
Fatal error: Maximum execution time of 30 seconds exceeded in /home/homeloan/public_html/officerote1.php on line 59
