PUBLISHED 15 JAN 2010
The residential and commercial property sectors are both set to benefit this
year from the improving economy.
So says FNB home loan strategist John Loos, who, while warning against
over-expectation, says that lower interest rates are already driving
mortgage-backed residential buying to higher levels, and that the slow turn
for the better of retail sales and manufacturing output bodes well for
retail and industrial property.
"The general economic growth improvement should also see the demand for
office space start to rise but it is residential property that is leading
the cycle, as one would expect. Households make decisions more quickly than
the commercial sector and when interest rates fall demand for residential
property starts to rise pretty quickly."
Also encouraging is the downward movement of the debt-todisposable income
ratio from 83% in 2008 to 79% in the third quarter of 2009, but the
financial pressure that the household sector still faces will serve to
moderate the pace and extent of the recovery, he says.
Nevertheless, oversupplies do appear to be diminishing and house prices are
back in positive territory, having shown a 2% national average y/y increase
in November and 2,7% in December.
The oversupply situation is also being ameliorated, Loos notes, by the sharp
decline in building completions, down about 30% in the third quarter of 2009
in terms of square metreage.
"This decline in building activity was hastened by strong input cost in
flation in 2006 / 7 which served to widen the gap between replacement cost
and the value of existing houses and made it difficult for developers and
builders to bring competitively-priced stock to the market."
Source: Property Trader
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