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Is the housing market turning?

Kenilworth Upper property 5FNB’s residential activity indicator has risen over the past two quarters, indicating strengthening residential demand.

“From a seven-year low point of 5.59 (on a scale of 1 to 10) reached in Q3 2016, the residential activity rating has seen a noticeable two-quarter rise to 6.31 in Q1 2017,” said John Loos, FNB household and property sector strategist. “Admittedly, the rise came as we were going into the seasonally stronger summer. However, to eliminate seasonal factors we use a statistical seasonal adjustment to compile our seasonally adjusted residential activity rating. This index, too, has risen noticeably from 5.69 in Q3 2016 to 6.01 in Q1 2017.”

Key leading economic indicators are pointing in the direction of a near-term economic growth strengthening, according to FNB, highlighting that this may strengthen employment and, in turn, household sector disposable income growth.

“In addition, interest rates have not risen further since March 2016, while real house prices (house prices adjusted for CPI inflation) have been in decline of late,” said Loos. “This has translated into improving housing affordability on a national average basis. Improved housing affordability combined with improving economic growth should be a catalyst for some strengthening in the demand for housing.”

On a year-on-year percentage change basis, the negative growth rate has not quite disappeared, but it has been diminishing in recent quarters, from -9% year-on-year decline in Q3 2016 to a negligible -1.25% decline as at Q1 2017.

“This strengthening in residential activity should ultimately lead to a return to positive growth in new household sector mortgage lending,” said Loos. “However, the lag time from when residential activity rating levels bottom out and start to grow, until when new mortgage loans granted begin to do the same can be four quarters or more, leading us to believe that a return to positive year-on-year growth in the value of new mortgage loans granted may only happen towards the second half of 2017.”

Photo: This stylish, north-facing Kenilworth home boasts 3 bedrooms (main en-suit) and a family bathroom. The main bedroom leads to a tranquil patio, while the open-plan lounge flows through to dining area and stunning kitchen. The quaint, manageable garden is perfect for small pets, while a separate entrance flatlet is ideal for work-from-home or teenage pad. The home boasts two secure parking spaces, excellent security, and is close to all amenities.
On the market for R4,5m it is being marketed by Jawitz Properties


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