PROPERTY
Property bullish, bad news for rentals
Posted Thu, 20 Apr 2006
The outlook for residential property in SA for 2006 is very positive, but the buy-to-let market will continue to struggle, FNB has said in its Residential Property Barometer, released on Wednesday.
The barometer, a forward-looking indicator of the residential property market, rose to 6.3 in the first quarter from 5.8 in quarter four of 2005.
According to FNB, residential prices have been buoyed by the reduction in transfer duty fees, as well as the zero fees for properties less than R500 000.
Moreover, consumer confidence now stands at a 24-year high, the group said, while new entrants remain a key segment of the housing market, with one out of four home buyers new entrants to the market.
The middle market also continues to form the backbone of homebuyers in the country as the group has shown considerably higher growth levels than upper-market homebuyers.
According to the bank, though, some 60 percent of sellers are not realising their asking price,
as buyers are putting up resistance to what FNB calls the "unrealistic property prices".
Year-on-year growth in the first quarter of 2006 (from the first quarter of last year) came to approximately 14.5 percent. This is lower than the 18.5 percent year-on-year growth reported between the fourth quarter of 2004 to the same period last year.
Moreover, buy-to-let investors can expect a weakening market. Letting agents have reported a fall in rental yields from 7.7 percent in June last year to just 5.6 percent in March 2006, FNB said.
While property prices have risen by about 15 percent since June 2005, rentals have inched up by only five percent over the same period.
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