Visit our COVID-19 site for latest information regarding how we can support you. For up to date information about the pandemic visit www.sacoronavirus.co.za.

bs-regular
bs-extra-light
bs-light
bs-light
bs-cond-light-webfont
bs-medium
bs-bold
bs-black

Community


Share knowledge. Ask questions. Find answers.

Online Share Trading

Engage and learn about markets and trading online

SBK Research: House price growth slipped into red in 2008

Reply
_nova
Super Contributor
If there's one thing I can say about SBK it is that their analysts research is always of the very highest quality. Do yourself a favour and read this one. Also, they mention a research paper "The Aftermath of Financial Crises" by Carmen M. Reinhart (University of Maryland. NBER and CEPR) and Kenneth S. Rogoff (Harvard University and NBER). Go here for the paper http://www.economics.harvard.edu/faculty/rogoff/Recent_Papers_Rogoff ...and it's a 'must read'. Bottom line according to their research is a 35.5% decline in real (yes that's REAL) house prices, and 59.9% in equities over a downturn phase that lasts an average 3.4 years. And the recession hasn't even begun to bite here...
0 Kudos
17 REPLIES 17
101bn
Contributor
Problem with the research i it is done on the Deeds Office which gives you a 6 months delayed figure!! Whatch the figures in 6 months time.. Eina
0 Kudos
Not applicable
Nova I dont see the SBK research...can u direct me?
0 Kudos
_nova
Super Contributor
Chartist: Look under Buyer and Sell Ideas - Latest Research Reports - then find the first one posted for today titled : "Economic Research House price growth slipped into red in 2008"
0 Kudos
SimonPB
Valued Contributor
nope, not the deeds office. SB home loans.

"Furthermore, national data from the Deeds Office are available only with a relatively long lag of up to nine months, so data from Standard Bank, which has a market share of about 27.7%, and whose data are generally highly correlated with those of the Deeds Office, are a good proxy for the national market."
0 Kudos
_nova
Super Contributor
and 101 you can take SBK's house price research as the best there is. ABSA's research is like our CPI, fudged and tweaked all over the place with the excuse that it is to 'smooth' the data (I suppose that may have something to do with the size of their loan book ;0). Anyway, SBK's house price index is based on reality (and by it's nature more noisy and volatile) but it's far preferred as a more accurate short to medium term reflection of house price trends. ABSA think they can predict house prices over long term by smoothing data. Well the past 12 months certainly put paid to that because they still seem to think (hope?) it is in an uptrend but at least they admit prices have 'cooled off'. The SBK data has adapted far more realistically to the real market conditions.
0 Kudos
platsak
Super Contributor
I am a practicing conveyancer, property developer, principal of a estate and rental agency and an property investor/speculator. Trust me when I say the market is pretty dead to non existant at the moment. My opinion is that things will problably not really pick from the middle of the year as we are led to believe. That said if one has cash there are some serious bargains out there at the moment. Especially the upper market units in in the real hooty snooty areas.Just make very sure of all the facts and costs before buying on an auction. Rental demand is quite strong at the moment in the lower end of the market.
0 Kudos
_nova
Super Contributor
jislaaik, platsak you must be the only honest estate agent out there! You have summed things up perfectly. Yes, there are real bargains out there (if you have cash) especially with a growing rental market because people simply cannot get bonds to buy and still cannot afford the inflated prices. Real income stagnated and declined the past decade while property went through the roof. Until property prices reach affordability levels (unlikely to happen in 2009) we wont see a turnaround. The median house price at over half a bar is simply out of most people's league, even most of the upcoming and established middle class. Everybody too*****nock the past twelve months and most people are much poorer (pension funds, investments, negative equity, maximised bonds etc). I reckon the thing is to time this one based on recovery in the US and UK. When their property markets bottom and turn, then the global economy will start to recover. Finally, the measure is that a 1.3 bar property rents for around 6k to 7k despite high demand while the bond on that same property is around 18k. And there's the rub.
0 Kudos
platsak
Super Contributor
Best rental nett ROI is currently on the bachelor to 1.5 bedroom units near universities, entertainment venues and bus roetes. Units goes for between 190 and 300 k in this market and one typically gets between R2500 - R4000 per month. Huge rental demand. That said there is a good argument of buying prime residential units in areas like for instance Houtbaai or Blouberg for a bargain with a view to make a huge capital gain in a few years time.
0 Kudos
Shaun_Siddall
Super Contributor
Just read last weeks FM and you will understand why.
0 Kudos
_nova
Super Contributor
which article are you referring to Shaun?
0 Kudos
_nova
Super Contributor
ok got it. thanks Shaun. Current issue "The Big Squeeze". Appropriately titled article. Well, if they're (the banks) really tightening up this much then our residential property market is in for a much bigger pounding than I thought. The average middle class townhouse (600 sqm erf, 220 sqm under roof) in a security estate is currently priced around 1.2 to 1.4 bars. Now if you have to put down a 20% deposit (240k min) then I wonder how many people can actually buy? And why would a buyer pay 1.2 bars if even them bankers are fearful of asset deflation? Amazing, the banks are actually admitting they are scared that house prices are going to fall! And to then go take an 80% bond at prime +3 is just adding insult to injury. The banks are setting themselves up for their own demise. At these usurous rates they're just going to end up with more and more PIP's
0 Kudos
Shaun_Siddall
Super Contributor
0 Kudos
Shaun_Siddall
Super Contributor
Yeah Nova it is quite scary. What this does do is a present a opportunity for the younger guys to get into the property market after missing the last boom - im looking for another property but will wait another 6-8 months to see what happens unless i pick up a awesome deal on auction. The problem with residential property is you usually only have a 12 month lease. I was having a chat with a rental agent yesterday and you will be lucky to maintain the rental your received the previous year. On the previous post you just have to do the numbers and you are better off having 4 units at R250k than 1 unit at R1m - from rates to transfer duty to rental return.
0 Kudos
platsak
Super Contributor
Remember that if you buy a property for under 500k in your personal capacity no transfer duty is payable. Shaun. As already stated look for affordable sectional title flats near universities, entertainment venues and bus roetes. There is certain areas like Arcadia in pretoria that meets this criteria with the added benifit of being within a kilometre from Loftus. Further to the above you can have said property registered for accomodation for the word cup soccer and receive a substantial return to make a sizable dent in that bond.
0 Kudos
_nova
Super Contributor
Shaun, Platsak, I absolutely agree with both of you. Shaun, you're definitely on the right track, especially if you're young and in a position to leverage property ownership. I did the same for a couple of years and then skipped out of property in 2005. You're definitely right that the R250k market is where the relatively safest action is. The rent is affordable, there's big demand, and selling prices are within young working people's budget. That said, you're also right to wait at least another 6 to 8 months (personally I've told myself to wait 12 to 24 months, to look for recovery in the US and EZ, and to follow trends at auctions and on PIP lists). Auctions and PIP's are amazingly accurate gauges of who is in charge of the market be it buyers, sellers, speculators, investors or banks. When we get to the point where geniune home buyers are missing, sellers give up, banks panic, speculators back off (includes developers or agents), and geniune investors bid and set the prices, then you can know that a bottom is likely setting in. At the moment I'm seeing far too much action similar to what happens at car repo auctions where 2nd hand dealers bid prices up against speculators to protect their market. Same thing is still happening at property auctions and it will still take some time before they realise that the market will stay irrational far longer than they can stay solvent. Anyway, property is almost never a bad bet, you just don't want to buy into negative equity and right now that's the risk. Though I do know of some blokes who are taking high risk bets on commercial and upper middle class property. They buy at auction for 10% to 20% below what the bank asks and then they quickly flip the property for a 5% to 10% profit, and believe me, there are still buyers in those segments who can afford 800k but just not 1 bar.
0 Kudos
Brazen
Super Contributor
Interesting thread - and thanks for you viewpoint as an insider platsak. Down here in the Garden Route the prime properties are changing hands quickly, at record prices, and in cash. A beachfront house in Plett went for 14 bar cash and a lagoon front property sold for 6.2 bar in Sedgefield over December - an all time high price for the area. Everything else is stagnant and a lot of the average stuff has been listed for well over a year now.
0 Kudos
platsak
Super Contributor
Brazen. The best properties will not be as affected by these times. I understand Rolls Royce still had a good year last year in SA. The superrich are not as affected as the rest of us. They are rarely in any case forced sellers. As the saying goes ____ the poor. I see that there are however the mediocre properties coming up in prime spots for at least 30%-60 of what the selling price would have been 2 years ago. Sellers are useally forced sellers who has numerous properties, the shortfalls of which multiplied forces them to sell at whatever price they can get in an effort to avoid bancruptcy and or it's properties in insolvent estates. That said I must admit that there isnt as much bargains coming across my table in the garden route area as in the Cape Town area. I must however admit that this is only my observations as a Vaalie.
0 Kudos