Fewer South Africans Can Afford To Own Housing Units

 According to the latest quarterly ABSA housing survey for the first three months of 2011, fewer South Africans are able to take advantage of the current favourable market housing conditions. The housing market is trapped in a dilemma in that conditions are extremely favourable to buyers but not many are financially able to enter the market. A low mortgage rate, sluggish growth in house prices, the abolition of transfer duties at the lower end of the market linked to an improvement in disposable personal income made it a good time to purchase.

The nett result was a declining nominal yearly house price of 1.3% and a growth of 3.2% in personal disposable income.

Despite these favourable conditions, fewer can purchase housing units due to high levels of debt and an inability to service debt. The lending criteria of the major Banks and the limitations imposed by the National Credit Act, retard the ability of most to increase their debt levels. In the fourth quarter of 2010, the percentage level of debt in relation to disposable income averaged 77.8%.
This was reflected in the yearly growth of housing unit prices, on a provincial basis.

Housing Prices Increase "Slightly"

 According to the latest FNB House Price Index released at the beginning of May 2011, a small increase in the year-on-year growth from 1.2% in March to 2.2% in April 2011 was recorded. John Loos, FNB Property Strategist ascribed this to the flurry of interest rates cuts by the South African Reserve Bank (SARB) which resulted in the mild increase in residential property demand. He indicated that the impact of the last cut in the mortgage, rate almost six months ago, was beginning to wear thin and would probably be short lived.

"Currently, the talk is about rising oil and fuel prices, rising consumer price inflation from 3.7 percent in February to 4.1 percent in March and the expectation of interest rate hikes later this year: Such an event, we believe, sustains the possibility of renewed price decline given the current weak demand relative to supply."Loos said.

The average price in the affordable segment was R377 864 and had grown 8.9 percent year-on-year; in the middle income areas that of R712 764 had grown 4.6 percent ; the high income area`s  R1.086 million had grown 3.8 percent , while the top end areas showed a 5.2 percent growth at about at about R1.882 million.

Existing Houses Still a Great Deal Cheaper Than Building a New Unit

 The latest ABSA Quarterly Housing Review reveals that the price gap between an existing house and a new housing unit was still near record levels. The average price of an existing house was about R1.01 million in the first quarter of 2011, which year-on-year was 1.6 percent lower in nominal terms. The building costs of a new middle segment house increased year-on-year by 8.7 percent in the same period, which means the average price of a new house rose by 14.3 percent year-on-year to about R1.5 million in the first quarter of 2011.
As such it was 33.1 percent or R498 800 cheaper to buy an existing house in the first quarter of this year than to build a new home.

One-Fifth of South African Population Live in RDP Houses

According to the General Household Survey (GHS) released by Statistics South Africa (Stats SA) on 5 May 2011, about a fifth of South African households live in state-subsidised homes. The GHS was conducted during July, August and September 2010, among 25 635 households in face- to-face interviews. "At the time of the survey, 19% of South African households were living in RDP or state-subsidised dwellings” Stats SA said.

Thirteen percent of the respondents had at least one household member on a waiting list for a RDP house. “In 2010, as in preceding years, female-headed households (11%) were more likely to receive a housing subsidy than male-headed households (9%)>"it said.

Some occupiers of these houses were concerned about the quality of the subsidised houses. Nationally, 17% said the walls were weak or very weak and 18% said the same about the roof. Stats SA found considerable variation between provinces in the perceptions about housing quality. The most complaints were recorded in the Eastern, Western and Northern Cape Provinces. Occupants of RDP houses in Gauteng and Mpumalanga seemed to be most content with the quality of the walls and roofs of their houses.

Pieter Rautenbach