The South African housing market is now gaining momentum (by Global Property Guide globalpropertyguide/Africa/South-Africa/Price-History) South Africa house prices After a lackluster performance in the past four years, the South African housing market is now gaining momentum. During 2012, the house price index for medium-sized houses rose by 9.53% (3.57% in real terms), the highest year-on-year increase since February 2008, based on figures released by ABSA. House prices increased by 2.93% (1.63% in real terms) during the latest quarter. In January 2013: the average price of small homes (80-140 sq. m) was ZAR789,400 (US$89,301) the average price of medium-sized homes (141-220 sq. m) was ZAR1,077,700 (US$121,915) the average price of large homes (221-400 sq. m) was ZAR1,592,800 (US$180,185). “Low interest rates will continue to support the property market and the affordability of mortgage finance,” said ABSA. But ABSA predicts that though nominal house prices will rise in 2013, these rises will remain in single digits in view of slowing economy, and real house price growth will remain under pressure, given continuing increases in inflation. Residential building plans approved dropped by 5.8% to 49,775 units in 2012. On the other hand, residential buildings completed rose 6.2% to 43,031 units. Total outstanding residential mortgage balances increased by 3% to ZAR790.9 billion (US$89.5 billion) in 2012, according to the South African Reserve Bank (SARB). During the housing boom (from 2000 to 2006), house prices rose by an average of 20% annually. Riding on the back of an empowered middle class, house price rises peaked in Oct 2004 with 35.7% annual growth (32.5% in real terms). However in Q1 2008 the boom ground to a halt, following the global financial crisis. In 2008, house prices fell by 0.5% (-9% in real terms) In 2009, the property market remained depressed, with house prices rising by a meagre 0.3% (-5.4% in real terms) In 2010, house prices increased by 2.3% (-1.1% in real terms), encouraged by South Africa hosting the 19th FIFA World Cup In 2011, house prices rose by just 1% (-5% in real terms), due to lower economic growth, rising inflation, and political corruption concerns Foreigners can own immovable property in South Africa without restriction. However, all foreign funds remitted to the country must be declared and documented to ensure repatriation. The property must also be endorsed ‘non-resident’, as a condition for repatriation. Non-resident investors have to pay Capital Gains Tax when they later sell their properties. The purchaser of the property is required to deduct a prescribed percentage from the proceeds of the sale and remit it directly to the South African Revenue Service before paying the balance to the seller. Looking back at the glory days During the glory period from 2000 to 2006, South Africa’s housing market boomed, driven by 4 main factors: The emergence of a financially stable black middle class had a tremendous impact on housing demand, encouraged by tax reliefs for individuals, in the context of a growing economy. South Africans who had parked money offshore during the Apartheid era were allowed (and required) to bring it back by September 2004. Much of this money went into property. Better stability and security helped. During Apartheid and its sequel, property prices badly lagged the economy, as the security situation went from bad to worse. Lastly, the Financial Sector Charter in 2003 boosted mortgage loan growth. Financial institutions committed to provide ZAR 42 billion (US$5.45 million) of housing finance to the low income market. Then in 2006, the CGT exemption on primary residences was raised from ZAR1 million (US$127,129) to ZAR1.5 million (US$190,694). Transfer duties on properties were lowered too. For example, no transfer duty is payable on properties valued at ZAR500, 000 (US$63,565) or less. The subsequent slowdown of house prices in 2008 can be attributed to the full implementation of the National Credit Act in mid-2007, interest rate hikes, and to the global financial crisis. The National Credit Act aimed to protect borrowers from over-indebtedness, by limiting the amount of funds that can be borrowed, and requiring every lender to assess borrowers’ credit-worthiness. It requires lenders to disclose every term in the contract and gives the borrowers the right to request their credit report, and to challenge the report if there are inaccuracies. The act has tended to reduce the supply of mortgage loans. Mortgage market shrinking South Africa mortgages The value of new mortgage loans granted by banks on residential property fell 34% y-o-y to the second quarter of 2011, so that during the first three quarters of 2011, total outstanding residential mortgages rose only marginally, with a y-o-y increase of only 2%.
Posted on: Thu, 05 Sep 2013 06:51:54 +0000
Trending Topics
Recently Viewed Topics
© 2015