Residential Property Market Overview 26 March 2015

2 Contents Overview of Property Stock Price Growth Lending Collections Key Take-outs

3 Overview of Property Stock

4 Segments within Residential

5 Overview of Property Stock Segments within Residential

6 Overview of Property Stock Regionalisation

7 Overview of Property Stock Estates Lightstone’s spatial research team captured boundaries of over 6000 closed communities and estates. This includes many forms of closed communities i.e. Golf Estates Equestrian and Polo Estates Coastal Estates Lifestyle Estates Country Estates Wildlife Estates We estimate around Residential properties in these communities to a total value of R643 Billion That’s an average value of R2mil - almost 3 times the national average of R700k per home As expected it mainly falls in the Luxury market where the average property price in the immediate area is greater than 1.5 mil Over 50% in Gauteng with a further 25% in the Western Cape

8 Overview of Property Stock Properties in Estates Regionalisation

9 Overview of Property stock Stock Growth

10 Price Growth

11 Price Growth Lightstone Forecast for 2014 Lightstone 2014 Forecast (Feb 2014): 6.7 % 2014 Actual Price growth: 6.72%

12 Price Growth Segmentation by Value

13 Price Growth Segmentation by Province

14 Price Growth Outlook for 2015 – Economic Backdrop

15 Price Growth Outlook for Residential property forecast 5.8% 3.5% 7.3%

16 Lending

17 Lending Banking activity In the higher value markets around 60% of property transactions are bonded Over 85% of bonds granted are for primary loans (i.e. not further advances or switches) Average mortgage lender Loan-to-Values of primary bonds range from 82% to 93% dependant on the bank - requiring deposits of between 7% and 18%

18 Lending Market growing steadily

19 Collections Proportion of value realised under distressed sales

20 Key Take-outs

21 Key Take-Outs The need for a strong economy Strong price growth in the low and middle segment markets – driven by the increased demand for formal housing keeps the overall residential property healthy as it also “feeds” buyers to the higher value markets. Suppressors to GDP growth like the labour unrest seen in 2014 continues to be a major threat to the property market as it specifically reduces the purchasing power of buyers and bank risk appetite in the low and mid value markets. Although noise around the restriction of foreign land ownership is unlikely to have a meaningful direct effect on the residential property market the unintended consequence might trigger a sell-off from South African investors in markets influenced by foreign buyers in anticipation of further restrictions.

22 Key Take-Outs Cautiously optimistic Although we’ve seen property price growth in the luxury market reach a peak in 2014 we are cautiously optimistic that we will continue to see positive inflation throughout 2015 albeit not as strong as in Increased bank risk appetite in combination with the responsible lending practices means that the property prices grows in a realistic way and the probability of a bubble forming is low. In the Established Luxury Estate property market price growth will continue to be determined by localised factors like proximity to major business centres and schools, road access, watertight security and aesthetic appeal. If the country succeeds in growing large numbers of people into a financial position to afford formal housing, as well as developing a wealth building group to drive the higher value markets, the South African property market should be in good shape in the long run.

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