February 2015
in 2015
‘The expectation of
stronger real household
disposable income growth
in 2015, compared with
2014, leads to a forecast
of further increase in
residential demand.’
THEO SWANEPOEL:
PROPERTY MARKET
ANALYST
FNB HOME LOANS
011-6320604
tswanepoel@fnb.co.zaThe information in this publication is
derived from sources which are regarded
as accurate and reliable, is of a general
nature only, does not constitute advice and
may not be applicable to all circumstances.
Detailed advice should be obta ned in
individual cases. No responsibility for any
error, omission or loss sustained by any
person acting or refraining from acting as
a result of this publication is accepted by
Firstrand Group Limited and / or the
authors of the material.
First National Bank – a division of FirstRand
Bank Limited. An Authorised Financial Services
provider. Reg No. 1929/001225/06
stock to the market at a significantly faster rate, and as such forecast 2015
square metres of residential completions to grow by 21,6%.
BETTER ECONOMIC AND HOUSEHOLD INCOME GROWTH
PROJECTED FOR 2015
The general mood in the residential property industry is a generally positive
one, and so it should be. The market is far from booming, but has shown a
nice solid performance over the past 3 years since 2012. Rising demand has
gradually mopped up “excess supply, and a noticeably increasing percentage
9 327 001
5 642 231
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
0
1 000 000
2 000 000
3 000 000
4 000 000
5 000 000
6 000 000
7 000 000
8 000 000
9 000 000
10 000 000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Residential Demand Rating (Scale 0 to 100)
SquareMetres
Residential Buildings Completed - Square
Metres
SquareMetres of Residential BuildingsCompleted FNB Valuers' Residential Demand Rating
Forecast
Housing
g owth to perhaps be slower than in
2014 should the SARB indeed persist
with interest rate normalisation. The
reasoning behind a slower rate of
growth in demand is the expectation
of a mild deterioration in residential
affordability as our average house
price growth forecast moves up a
notch from 7,2% in 2014 to 8,7% for
2015. We expect to exceed average
employee remuneration forecast at
a lowly 5,3% for 2015.”
There are two relevant affordabili-
tymeasures - the first is the average
house price/average employee
remuneration index, and
- the second measure
is the instalment
payment value
on a new 100%
bond on the
average priced
house/average
e m p l o y e e
remunera-
tion ra-
tio index. Both of these affordability
measures began to show some dete-
rioration in 2014. The former Index is
forecast to rise 3,3% in 2015, while
the latter is projected to rise at a
faster 7,3% based on house price,
employee remuneration and interest
rate forecasts.
The FNB-BER Residential Con-
tractors Building Confidence In-
dex jumped from 58 to 69 (Scale
of 0 to 100) in the final quarter,
continuing a steadily rising
trend, while third quarter
2014 m² of residen-
tial building plans
passed surged
to 19,2%
year-on-year
growth.
L o o s s a y s ,
“While this growth
may sound extreme to
some, to give some perspective, this
would still imply that 2015 building
completion levels would be -39.5%
below the boom time peak year of
2007, and after some years of very low
levels of building activity, we finally
believe that the time has come for
more me ningful growth.”
He concludes, “Although we fore-
cast further strengthening in certain
other residential property numbers,
including a mild increase in house
price inflation, a further shortening
of the average time of homes on the
market, and a further rise the FNB
Market Strength Index, we believe
that the highlight of 2015 will prove
to be a notable strengthening in the
level of newly built residential units
coming onto themarket. This, in turn,
is forecast to lead to some easing in
residential supply constraints come
2016, resulting in slowing annual
house price growth as we move into
2016 and beyond.”
■