Carin Smith
Cape Town - The gradual deterioration of affordability in the residential property market looks set to continue in 2016, John Loos, household and property sector strategist at FNB Home Loans, said on Tuesday.
The home affordability picture deteriorated further in the fourth quarter of 2015, continuing a gradual deteriorating trend that began back around 2013.
He expects interest rates to gradually increase further and municipalities and utilities to continue their above-inflation tariff and tax increases. In addition, the household debt-service ratio is expected to rise further, driven higher by further interest rate hikes.
"But we are of the belief that not all of the measures of affordability will continue to deteriorate this year," said Loos.
While he would expect rising interest rates to lift the bond instalment/per capita disposable income ratio higher next year, expected slowing house price growth could possibly end the rising trend in the average house price/per capita disposable income ratio, as we get into the anticipated real house price correction phase. This may also conceivably end the rising price-rent ratio.
According to Loos, house price inflation is far from strong, but has still outpaced slowing per capita disposable income growth in recent times. This has led to further recent deterioration in the average house price/per capita disposable income index as well as the instalment on a 100% bond on the average priced house/per capita disposable income ratios.
The home running cost-related affordability measures also continue their multi-year deterioration. The exception, however, is home maintenance and repairs affordability, which has actually improved since 2008.