Housing in Southern Africa December 2015

Housing

reflected in banks’ risk appetites and lending cri- teria, impacting the access to credit and growth in household con- sumption expenditure against the background of a continued low level of savings. Consumer financial vulnerability, as mea- sured by the Bureau of Market Research (BMR), deteriorated in the sec- ond quarter of 2015 compared with the first quarter. At an overall

refers to make shift structures not erected according to approved ar- chitectural plans, e.g. shacks in in- formal settlements andbackyards. • 55,3% of households living in formal housing, fully owned their properties, with 10,6% partially owning their properties (financed by and not yet fully paid off to financial institutions) and 21,7% renting the properties they were living in. • 15,3%of households were living in RDP or state subsidised housing. Levels of residential building activity improved in the first eight months of 2015 compared with a year ago, but growth remained well in the single digits over this period. In the planning phase, as reflected by the number of building plans approved, as well as in the construction phase, i.e. housing reported as being completed, activity remained largely subdued along the lines of the past six years against the background of economic, household finance and confidence factors. Over this period these levels of building activitywerewell below those of 2005 - 2007, when the economy and real household disposable income were growing strongly and interest rates were relatively low. The number of new housing units for which building plans were approved was up by 6,8% y/y to more than 41 000 units in the period January to August this year. This was the net re- sult of growth of 10,1%y/y in the seg- ments of houses less than 80m² and flats and townhouses, whereas the segment for houses larger than 80m² showed a small decline of around 1% y/y in the eight-month period. The number of new housing units constructed increased by 7% y/y to

more than 25 200 units in the first eight months of the year, which was largely driven by the two categories of houses, which recorded combined growth of 14,5%y/y to an overall total of more than 18 000 units. However, the segment of flats and townhouses registered a contraction of 8,1%y/y to about 7 200 units built in January to August from almost 7 900 units built in the corresponding period last year. It should, however, be kept in mind that there is normally a significant time lag between the planning phase and eventual completion of large housing projects. Building Confidence Building confidence, based on the BER’s building confidence index, declined for the third consecutive quarter in the third quarter of 2015, to a level of 44 index points from a recent high of 60 in the fourth quarter of 2014. With an index reading of 50 representing confidence neutrality, the majority of survey respondents indicated that business conditions in the building sector were unfavour- able in the third quarter. This decline in building confidence was mainly driven by markedly lower levels of confidence in the sectors of building material manufacturers and retailers. The building confidence index mea- sures prevailing business conditions in the building industry sub-sectors of architects, quantity surveyors, main building contractors, sub-con- tractors, manufacturers of building materials and retailers of building materials and hardware. The variable mortgage base inter- est rate is 9,5%per annumafter being

Consumer Financial Vulnerability Index (CFVI) reading of 50,8 in the second quarter (52,7 in the preced- ing quarter), consumers remained financially mildly exposed. An overall and/or sub-index read- ing of 40 - 49,9 in consumer financial vulnerability indicates that consum- ers are financially very exposed, with an index reading of 50 - 59,9 indicat- ing that consumers are financially mildly exposed, whereas an index reading of 60 - 79,9 indicates that consumers are financially secure. Overview Based on statistics supplied by Light- stone, there were more than 6,1 mil- lion residential properties in South Africa with a total value of R4,16 trillion in the second quarter of 2015. Of themore than 6,1million prop- erties, about 2,18million (35,5%) with a total value of R2,29 trillion were bonded and 3,96million (64,5%) with a total value of R1,87 trillion were non-bonded. The General Household Survey 2014, published by Statistics South Africa in June this year, provided some insight into housing conditions in the country in 2014: • 79,4% of a total of 15,602 million households were living in formal housing. Formal housing refers to structures built according to approved architectural plans, i.e. houses on separate stands, flats, apartments, townhouses and rooms and flats in backyards. • 12,9% of households were living in informal housing. Informal housing

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December 2015