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Contractual agreements in the housing market

State housing policy initiatives

Impact of housing policies

Features of the mortgage market

The Home Finance Company: HFC

Housing finance and the economy

Russia India and China: economic problems

The incomplete nature of financial markets in Russia

Housing stock in India has traditionally been privately owned

China has three different types of home mortgages

Emerging economies face a myriad of issues

Housing finance is not neutral to economic development

Commercial property market

Commercial property - particularly retail, industrial and office - benefited tremendously from the consumption-driven growth of the South African economy. From 2001 to 2006, the industries with the largest employment gains were wholesale and retail trade, construction, manufacturing and financial intermediation (Statistics SA, 2006b: vii), while the average annual real value added growth rate (seasonally adjusted) ofthe tertiary sector was about 5% compared to 3.7% (secondary sector) and 0.6% (primary sector; Statistics, 2007b). Retail, industrial, and office property have been experiencing low vacancies and solid rental growth rates (Rode, 2006b).

Before 2000, the residential, office and industrial property cycles moved in sync. However, an analysis ofthe three property market cycles by Rode shows a divergence since 2000. While the residential property market skyrocketed, the office market was affected by an oversupply resulting from increased development activities in the late 1990s. Lagging the residential market by a few years, the industrial market took off in 2003, followed by the office market in 2005. In contrast to the residential property market, which is affected by the interest sensitivity of private households, the office and industrial markets are expected to continuously show low vacancies and solid rental growth rates in the next 5 years.

Moreover, the South African commercial property market is characterized by a strong demand for investment-grade properties by institutional investors, listed property companies and private equity investors, a demand that is not met by the current stock.

The retail sector has benefited from the high consumer demand in general, and the emergence ofan affluent Black middle-class of2 million Black South Africans , in particular.

Retail rentals are expected to increase in the future, despite pressure from new developments, as increased supply ofretail space is balanced by a strong consumer demand.6 A trend in the South African retail property market is targeting the Black African segment that comprises about 80% of all South Africans. The undersupply of formal retail facilities and shopping centres in Black townships, together with the higher employment and income rates among Black South Africans, increased the attractiveness of the largely untapped township market to national retailers and shopping centre developers.

The reintegration of South Africa with the global community since the end ofapartheid allowed the country to successfully position itselfas an attractive holiday, retirement, and second-home destination, particularly for Europeans. This, in turn, stimulated the residential and hospitality property market ofcertain geographical areas such as Cape Town and the Western Cape.

The demand for hospitality property is likely to increase, especially with the 2010 soccer World Cup to be hosted in South Africa. Besides owner-occupiers and property developers, the listed property sector significantly drives the demand for commercial mortgages, as the level of gearing in this industry is typically 30-40%. Listed property companies in South Africa still have a relatively low share in fixed property (18-20%) compared to, for example, Australia (85%; Buys, 2006: 50).

However, the listed property sector has experienced fast growth and excellent performance in recent years. From 2000 to 2006, the listed property sector, consisting ofProperty Unit Trusts (PUTs) and Property Loan Stock (PLS) companies listed on the Johannesburg Stock Exchange (JSE), expanded significantly. From 2004 to 2006, the listed property sector appreciated by 131%. Over the last 3 years, the listed property excelled over all South African asset classes, with a return of about 38% annualized in rand terms and 36% in dollar terms respectively.

Although listed property is interest-rate sensitive, the underlying commercial property market fundamentals are expected to outweigh the interest rate increase and contribute to continuous strong growth and sound performance in the listed property sector.