Expensive Homes Not Affected by Recession

November 18 - A new report issued in South Africa suggests that wealthy home owners may have been only slightly affected - if at all - by the recession.

According to the report commissioned by FNB Home Loans, homes with a value of around R1.86 million have not lost value in nominal terms, in comparison to other sectors of the property market.

Nevertheless, not everyone was in agreement with FNB's latest findings, including rival bank Absa.

Absa, for example, found that luxury houses actually dropped a nominal 4% in value.

"The average price of houses in this category dropped by 9.9% y/y in real terms in the third quarter, compared with a real price decline of 5.5% recorded in the preceding quarter," said Aba analyst, Jacques du Toit.

Turning to the middle segment, du Toit said: "House prices in the middle segment of the market were lower by 1.1% y/y at a level of about R957,900 in the third quarter of 2009, after declining by 3.2% in the second quarter. In real terms, middle segment house prices were down by 7.2% in y/y in the third quarter of the year (-10.2% y/y in the second quarter).

FNB said that this year has been a year of "moderate recovery in demand", which should ultimately result in the return of the national price inflation.

"The question often asked, though, is which segments are showing the better or worse performance," said analysts from FNB Home Loans' Property and Mortgage Market Analytics division.

"Examining deeds data volumes for our sample of areas used in the price indices, it would appear that the relationship of previous years looks set to hold true," said FNB.

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11/18/2009 10:30:41 AM