Post on 27-Jul-2020
PROPERTY BAROMETER – House Price Indices by Segment
The Sectional Title Housing Market Segment still mildly outperforms the Full Title
Segment, but both segments have slowed through 2016 to early-2017
21 April 2017
Sectional Title homes have seen some mildly superior price growth performance compared with Full Title
over the period 2012 to early-2016. This we believe to be reflective of a financially constrained
Household Sector, along with significant affordability deterioration in recent years when it comes to
certain home-related costs, notably municipal rates and utilities tariffs whose inflation rate has outpaced
broader consumer price inflation. The result is a search for affordability in terms of running costs, and
Sectional Title homes can often provide such affordability to a greater extent than Full Title homes.
RELATIVE HOUSE PRICE PERFORMANCES OF SECTIONAL VS FULL TITLE
Although the FNB Sectional Title House
Price Index remained at a slightly faster
growth rate than Full Title, i.e. 4.4%
year-on-year in the 1st quarter of 2017
(from a multi-year high of 8% in the 3rd
quarter of 2015) vs Full Title’s growth of
2.4% (from a multi-year high of 6.7% in
the 3rd quarter of 2015), both house
price indices were experiencing slowing
growth.
Our panel of FNB valuers also perceives
the Sectional Title market to still be
stronger than the Full Title market,
although they too see it as having cooled
off.
This perception is reflected in a recent
decline in our FNB Valuers Market
Strength Indices (MSI) for both Full Title
and Sectional Title, but where at 50.91
the Sectional Title MSI remains slightly
above the 50.63 for the Full Title MSI.
Note: FNB Valuers’ Market Strength
Index (MSI) explanatory notes on page
4.
Examining Deeds data transaction
volumes for individuals split by Sectional
vs Full Title, we have seen Sectional Title
volumes growth outperform that of Full
Title for most of the time from 2012 to
end-2016, although both segments have
seen recent year-on-year decline in
volumes.
Transaction volume growth-wise too,
therefore, Sectional Title appears to have
outperformed Full Title since around
2012.
As at the final quarter of 2016, we
estimated Sectional Title property
transactions registered by individuals (“Natural Persons”) to be in year-on-year decline to the tune of
-5.17%, while those of Full Title were declining by a more significant -8.52%.
SECTIONAL TITLE SUB-SEGMENT PERFORMANCES
Within the Sectional Title segment, “smaller was still better” in the 1st quarter of 2017 when one compares
the relative strength of the various sub-
segments, although all sub-segments
have been slowing.
The smallest sized Sectional Title sub-
segment, namely the “Less than 2
Bedroom” segment, still showed the
strongest price inflation to the tune of
7.7% in the 1st quarter of 2017. Then
came the 2 Bedroom sub-segment with
4.8% price growth, while the largest “3
Bedroom and More” category was the
slowest sub-segment with 3.7% average
price growth.
This “Less than 2 Bedroom” sub-
segment is believed to be a key target of
the highly-cyclical 1st time buyers. After
benefiting heavily from a strong 1st time
buyer period through 2011 to 2014,
when 1st time buyers peaked at an
estimated 28% of total buying early in
2014, this segment has now fallen on
mildly tougher times, as the estimated
1st time buyer percentage has receded
to nearer to 20% (21% in the 1st quarter
of 2017 according to the FNB Estate
Agent Survey). However, such 1st time
buyer levels remain “respectable”
compared to the 12% low back around
the recession of 2008/9.
-8.52%
-5.17%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2010 2011 2012 2013 2014 2015 2016
Property Transaction Volumes by Title
- year-on-year percentage change
FULL SECTIONAL
JOHN LOOS:
HOUSEHOLD AND PROPERTY SECTOR STRATEGIST
087-328 0151
John.loos@fnb.co.za
The information in this publication is derived from sources which are regarded as accurate and reliable, is of a general nature only, does not constitute
advice and may not be applicable to all circumstances. Detailed advice should be obtained in individual cases. No responsibility for any error, omission or
loss sustained by any person acting or refraining from acting as a result of this publication is accepted by Firstrand Group Limited and / or the authors of the
material.
First National Bank – a division of FirstRand Bank Limited. An Authorised Financial Services provider. Reg No. 1929/001225/06
FULL TITLE SUB-SEGMENT PERFORMANCES
In the Full Title segment, performance
gaps have narrowed to insignificant
margins, and the “smaller is better”
adage doesn’t clearly hold true in this
segment.
The smallest sub-segment, i.e. the “2
Bedrooms and Less” category, showed
the slowest price inflation to the tune of
1.5% year-on-year in the 1st quarter of
2017.
The 3 bedroom segment with 2.6% was
the fastest, while the largest “4 Bedroom
and More” segment, was in the middle
with 1.9% year-on-year price growth.
These price inflation performance differences are insignificant, and all 3 of these sub-segments
underperform the 3 major Sectional Title sub-segments still.
Taking a simple percentage differential
between the average Full Title house
price and that of Sectional Title, the
outperformance of Sectional Title in
recent years has reduced the gap by
which the average Full Title house price
exceeds that of the smaller-sized
Sectional Title category, from a revised
27.6% as at the end of 2011 to 21.6% by
the 1st quarter of 2017.
CONCLUSION
In short, ongoing above-inflation municipal rates and tariff increases, tough economic and financial
times, and rising personal tax rates, pose financial challenges to the Household Sector. This environment
plays into the hands, relatively speaking, of the (on average) smaller sized Sectional Title market segment
where home running costs can often be better contained than in the case of larger-sized Full Title
properties with their individual stands.
Therefore, although both segments softened through 2016 and into early in 2017, Sectional Title
remained mildly stronger over this period than the Full Title Segment.
ADDENDUM - NOTES:
Key notes with regard to the FNB Segment House Price Indices by Title and Room Number:
• The Indices are constructed using transaction price data from homes financed by FNB.
• The minimum size cut-off for full title stands is 200 square metres, and the maximum size is 4000
square metres
• The maximum price cut-off is R10m, and the lower price cut-off is R20,000 (largely to eliminate
major outliers and glaring inputting errors).
• The indices are very lightly smoothed using a Hodrick-Prescott smoothing function with a Lambda
of 5.
Note on the FNB Valuers’ Market Strength Index: *When an FNB valuer values a property, he/she is
required to provide a rating of demand as well as supply for property in the specific area. The demand and
supply rating categories are a simple “good (100)”, “average (50)”, and “weak (0)”. From all of these ratings
we compile an aggregate demand and an aggregate supply rating, which are expressed on a scale of 0 to
100. After aggregating the individual demand and supply ratings, we subtract the aggregate supply rating
from the demand rating, add 100 to the difference, and divide by 2, so that the FNB Valuers’ Residential
Market Strength Index is also depicted on a scale of 0 to 100 with 50 being the point where supply and
demand are equal.
SEGMENT PERFORMANCES
• Sectional Title vs Full Title
• Full Title
• Sectional Title
• Sectional Title Per Square Metre
• Home Size Segments
50.30
53.10
50.65
35
40
45
50
55
60
65
2001 2003 2005 2007 2009 2011 2013 2015 2017
Ind
ex
Sc
ale
0 t
o 1
00
FNB Valuers Residential Market StrengthIndices - Sectional Title
3 Bedrooms Less than 2 Bedrooms 2 Bedrooms
• Existing Homes vs Vacant Land
2013 2014 2015 2016 Q2-2016 Q3-2016 Q4-2016 Q1-2017
FULL TITLE SEGMENT
Full Title Average Price (Rand) 955,493 1,022,950 1,091,118 1,144,587 1,143,073 1,148,990 1,153,816 1,159,681
- year-on-year % change 5.6% 7.1% 6.7% 4.9% 5.7% 4.4% 3.2% 2.4%
- quarter-on-quarter % change 0.9% 0.5% 0.4% 0.5%
2 Bedrooms and Less (Rand) 514,263 546,047 576,344 604,333 604,491 606,835 607,127 607,823
- year-on-year % change 4.0% 6.2% 5.5% 4.9% 5.8% 4.6% 2.9% 1.5%
- quarter-on-quarter % change 0.9% 0.4% 0.0% 0.1%
3 Bedroom (Rand) 978,712 1,041,173 1,109,625 1,166,815 1,165,278 1,171,146 1,176,519 1,184,444
- year-on-year % change 4.8% 6.4% 6.6% 5.2% 6.0% 4.6% 3.3% 2.6%
- quarter-on-quarter % change 0.9% 0.5% 0.5% 0.7%
4 Bedrooms and More (Rand) 1,557,678 1,653,844 1,735,730 1,789,188 1,785,798 1,794,383 1,802,560 1,807,915
- year-on-year % change 5.7% 6.2% 5.0% 3.1% 3.4% 2.9% 2.4% 1.9%
- quarter-on-quarter % change 0.7% 0.5% 0.5% 0.3%
SECTIONAL TITLE SEGMENT AVERAGE HOUSE PRICE
Sectional Title Average House Price (Rand) 756,906 813,806 877,569 929,459 924,776 934,957 944,433 953,966
- year-on-year % change 6.1% 7.5% 7.8% 5.9% 6.3% 5.5% 4.8% 4.4%
- quarter-on-quarter % change 1.2% 1.1% 1.0% 1.0%
Less than 2 Bedroom (Rand) 514,989 558,293 631,768 699,642 693,973 705,533 718,298 732,896
- year-on-year % change 4.5% 8.4% 13.2% 10.7% 11.7% 9.5% 8.1% 7.7%
- quarter-on-quarter % change 1.9% 1.7% 1.8% 2.0%
2 Bedroom (Rand) 671,432 711,824 765,264 811,659 807,244 816,747 825,679 835,460
- year-on-year % change 4.3% 6.0% 7.5% 6.1% 6.4% 5.7% 5.1% 4.8%
- quarter-on-quarter % change 1.3% 1.2% 1.1% 1.2%
3 Bedrooms and More (Rand) 1,019,469 1,097,391 1,174,429 1,235,127 1,229,483 1,242,080 1,252,890 1,261,565
- year-on-year % change 4.8% 7.6% 7.0% 5.2% 5.5% 4.9% 4.2% 3.7%
- quarter-on-quarter % change 1.1% 1.0% 0.9% 0.7%
SECTIONAL TITLE PER SQUARE METRESectional Title Average Price (Rand/square metre) 8,460 9,025 9,769 10,470 10,386 10,548 10,719 10,904
- year-on-year % change 4.1% 6.7% 8.2% 7.2% 7.3% 6.9% 6.6% 6.6%
- quarter-on-quarter % change 1.6% 1.6% 1.6% 1.7%
Less than 2 Bedroom (Rand/square metre) 10,137 10,912 12,253 13,755 13,579 13,905 14,284 14,722
- year-on-year % change 5.7% 7.6% 12.3% 12.3% 12.8% 11.5% 10.8% 11.1%
- quarter-on-quarter % change 2.5% 2.4% 2.7% 3.1%
2 Bedroom (Rand/square metre) 8,534 9,091 9,774 10,384 10,318 10,452 10,586 10,735
- year-on-year % change 4.6% 6.5% 7.5% 6.2% 6.4% 5.9% 5.5% 5.4%
- quarter-on-quarter % change 1.3% 1.3% 1.3% 1.4%
3 Bedrooms and More (Rand/square metre) 7,532 8,067 8,648 9,099 9,035 9,154 9,274 9,387
- year-on-year % change 4.0% 7.1% 7.2% 5.2% 5.2% 5.0% 5.0% 5.1%
- quarter-on-quarter % change 1.2% 1.3% 1.3% 1.2%
AVERAGE HOUSE PRICE BY MAJOR SEGMENT