Although the residential property market has rallied in recent times, it would appear that 2015 has gotten off to a ‘soft’ start which may be indicative of things to come.
In their 2014 year-end roundup, FNB’s property strategist John Loos explained that while he expected 2015 to bring mildly stronger house price growth he believed it unlikely that the property market could escape negative economic events indefinitely. Indeed, he added that the next decade would be one in which the housing market experiences a gradual broad downward correction in real prices towards levels more reflective of a weak economy.
FNB’s latest Estate Agent Survey lends credence to Loos’ comments. According to the survey, there has been a “distinct” lack of strengthening despite low oil prices which theoretically should have given the economy a shot in the arm.
Notes Loos: “What is becoming increasingly apparent is that South Africa’s myriad of policy and structural constraints on its economy are working against our benefiting from periodic positive global economic events. Therefore, as a slew of weak economic numbers emerge from early in 2015, it should perhaps not be surprising that the Estate Agent Survey may be beginning to point towards a residential market starting to move more broadly sideways as opposed to stronger.”
Despite this somewhat bleak outlook, FNB’s home loan division which is headed up by CEO Marius Marais is reportedly going strong. Speaking at a recent media briefing, Marais explained that as of December 2014, the division has grown home loan advances by six per cent on a year-on-year basis and by 13% over the past three years which compares well with overall growth achieved by the market.
Says Marais: “We are outgrowing the market in terms of our mortgage loan book. This can be attributed to both our successful partnership model, internally within FNB and externally with our industry partners, as well as on the back of FNB transactional customer growth that has increased its penetration into the South African market by materially increasing its customer numbers.”
Another ‘good news’ story the bank can share is that the bulk of their ‘Quick Sell’ properties have been moved off the books. Initiated in 2009, the Quick Sell programme was established with a view to assisting clients who could no longer viably service their bonds and provide them with workable solutions which won’t leave them debt ridden for years to come.
In line with this, Marais says it’s absolutely imperative that homeowners approach their banks before their financial situation deteriorates as it makes a big difference to the overall debt picture.
In terms of other trends, Marais says that it has become apparent that homeowners are less inclined to “house hop” as easily as they did in the past given the costs involved which is propping up the renovation and hardware market. Demand for smaller, more manageable properties in secure nodes is also very much on the rise he says.