IEASA National - News

FNB reports “market still going well”   Article Date :9 Oct 2006 Lower and middle end of the markets still in demand Although sales momentum has definitely slipped a gear or two at the top end of the residential property market there is still good impetus for positive growth in the lower and middle end of the markets with the demand generated by people purchasing for own use rather than for investment or speculative purposes. This is one of the main findings of FNB’s most recent barometer from research carried out among 150 property professionals and developers. Elaborating on the findings in Durban this week, Erras Lintvelt, FNB Regional General Manager, KZN, said the findings confirmed general market opinion that the market was “still going well” and benefiting from global trends. Growth in the price of property, as expected, had slowed, but some weighty performances were still apparent in the lower to middle income markets. He cited New Germany and Escombe in Durban and Scottsville in Pietermaritzburg as KZN’s best price growth performers. Price growth in the previous top performing suburbs, such as Musgrave, Essenwood and Durban North, had slowed to around a three percent year on year rate. Lintvelt also highlighted Umbilo and Atholl Heights as strong activity areas, mainly driven by emergent buyers relocating closer to CBD work opportunity. However, there were some areas of concern that the market could not ignore, specifically the growth in credit demand and the continual fall-off in personal savings. The former was one of the key factors surrounding future interest patterns as high borrowing fuelled inflation, which the Reserve Bank had made clear was its number one priority to keep within tight parameters. The lack of savings was also an area for some apprehension as this suggested domestic funds normally allocated to savings were now being redirected into servicing credit borrowings, such as motorcars and domestic goods. Lintvelt said that while the barometer had unearthed an immediate negative impact on the market from the June 4 rate increase this had been short-lived, possibly due to South African homeowners traditional exposure to rate increases. Some fear was also detected among people with vivid memories that recent increases were a precursor to the high rates of the late nineties, but these were in the minority and of little market influence. Turning to new developments, Lintvelt said serious attempts were being made by some large developers to redirect their supply into the lower end of the market. These, if structured round good value for money and priced correctly for their areas, would find ready markets. Of concern was the amount of new development plans being passed by various KZN municipalities. These far exceeded the volumes currently being delivered and could reach a point of surplus delivery with the potential to impact on future price growth quite dramatically in the countdown to the 2010 World Soccer Cup. He also aired some concern over current cement shortages, advising developers and contractors to exercise caution in their future pricing. From a regional perspective the barometer showed a “slight” buyer movement away from golf estates in the greater Durban area, but not nearly to the same levels as in Johannesburg where the barometer suggested a saturation of golf estates. Demand for eco estates in KZN, such as Phezulu, Ekubo and Simbithi held firm and was expected to continue. While Lintvelt anticipated the average value of FNB homeloans for KZN issued in the third quarter to be lower than the R560 000 recorded in the second quarter by the bank, unit volumes were still climbing, but at a less steep rate. A “small” increase in fixed rate products and conversion from variable to fixed rate had emerged during the third quarter mainly in the homeloan category of R700 000 to R1,5 million. CLICK HERE TO RETURN TO THE MAIN NEWS PAGE