Western Cape Business News

Send  Share  RSS  Twitter  22 Jun 2009

PROPERTY: Affordable Housing Latest Victim


Recent Western Cape Business News

THE most recent residential property indices released by Lightstone indicate that the latest victim of the market downturn could be the one segment that has until now withstood the fallout.

Price wise, the affordable housing market has been the top performer over the past few years. But signs are now emerging that a price collapse might be on the horizon. According to economist John Lottering of Bellville-based Rode & Associates: ‘Lightstone’s research shows that, on a month-on-month annualised basis, prices in the affordable category are currently showing the largest contractions. In January 2009, the annualised monthly growth rate was a staggering minus 28%.’ The affordable category represents houses of R250 000 and below.

Says Lottering: ‘Because the Lightstone indices are ultra smooth, it is not too dangerous to extrapolate month-on-month growth rates. Thus, one can state that should the latest month-on-month growth persist over the next twelve months, then price levels in the affordable category will be 28% lower in a year’s time.’

Referring to a recent analysis by Paul Harris, chief executive of FirstRand, Erwin Rode wonders whether South Africa could now be heading towards its own sub-prime crisis: “During the Clinton era, the US government put pressure on lending institutions to grant mortgage bonds to categories of people who normally wouldn’t have qualified for loans. This may well be similar to what the government has been doing in South Africa for the past few years with regard to the ‘gap’ market. The question is how many sub-prime type mortgages have in the process been granted due to political pressure? We simply don’t know.”

Rode speculates that the forecast sharp decline in affordable house prices might be the result of rising unemployment.

Says Rode: “This segment represents salaried individuals at the bottom end of the income ladder who might be the first to be laid off in times of a crunch. Together with tight profit margins on home loans and the high indebtedness of consumers, this might explain why banks have become ultra conservative in their lending practice.”

Business Profilesinfacet-jewellersback-care-solutions-cape-townvillaformosadecor-and-furniture-cape-town

Online Foreign Exchange
Foreign Exchange


Fax 2 Email



Online Casino


Shop Online

Study IT
Study IT Online

Web design
Web Design


Work from Home
Company News


© 2020 All rights reserved.

Daily Newsletter Subscription


Subscribe to the Western Cape Business News Daily News and information email (it's free).

Thank You
Your email address has been added.

Email Address: