What needs to happen before the next strong property performance and how long will it take?

1. First National Bank - a division of FirstRand Bank Limited. An Authorised Financial Services and
Credit Provider (NCRCP20).
October 2011
it take?
next strong property
Property Outlook
performance and how long will
What needs to happen before the

2. FNB House Prices
FNB House Price Index - Real and FNB House Price Index Growth
Nominal Growth (Seasonally-adjusted month-on-month)
40%
1.5% 1.34%
30%
1.0%
20% 0.5%
10% 0.0%
5.6%
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
0% 0.3% -0.5% -0.24%
Jan-02 Jan-04 Jan-06 Jan-08 Jan-10
-10% -1.0%
-20% -1.5%
FNB House Price Index - year-on-year percentage change FNB House Price Index - Seasonally Adjusted - month-on-
Real Average House Price (CPI adjusted) - year-on-year percentage change month percentage change

3. Great Depression US Debt
situation appears tame

4. Constrained oil supply makes
for economy-constraining
prices
Brent Crude Oil - Real $/Barrel
60 20
50 15
10
40
$/barrel
5
%
30
0
20
-5
10 -10
0 -15
1970 1975 1980 1985 1990 1995 2000 2005 2010
US real GDP (q/q % ann.) Real brent crude - $/barrel

5. Some key economic indicators
are slowing again
Key Leading Indicators
- month-on-month % change
2.0%
1.5%
1.0%
0.5%
0.0%
Jan-00
-0.5% Jan-02 Jan-04 Jan-06 Jan-08 Jan-10
-1.0%
-1.5%
-2.0%
-2.5%
South Africa Leading Indicator OECD Leading Indicator
USA Leading Indicator

6. High household indebtedness
contstrains economic growth
Household Debt to Disposable Income
Ratio vs Interest Rates
82 25
80 76.8
23
21
70 19
17
%
15
%
60
13
11
50 9
7
40 5
1990 1993 1996 1999 2002 2005 2008 2011
Household debt-to-disposable income ratio (Left Axis) Prime Rate

7. SA Long term economic
growth rate trends
Real GDP Growth - 5-year annual averages
5
4.2 4.2
4
3.2
3 2.8 2.8
2.6
%
2
1.3
1 0.6
0
1971- 1976- 1981- 1986- 1991- 1996- 2001- 2006-
1975 1980 1985 1990 1995 2000 2005 2010
Real GDP Growth - 5-year annual averages (%)

8. Long term consumer price inflation
and short term rates trends
Long Term Consumer Inflation and Interest
Rate Trends
20
%
10
0
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010
Consumer Price Inflation (PCE Deflator - y/y % change) Prime Rate

9. FNB Cap Rate Index
FNB All Commercial Capitalisation
120
Rate Index vs Long Bond Yields 13
110 12
Cap rate Index (Q1 2001 =
11
100
Yield (%)
10
90
9
100)
80
8
70 7
60 6
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
FNB All Commercial Capitalisation Rate Index (Q1 2001 = 100)
Government bond yields 10 years and longer (%)

10. Wide replacement cost gap has
slowed building activity
Full Title Property Replacement Cost Gap
40.0%
30.0%
21.7%
20.0%
10.0%
0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-10.0%
Difference between the average full title building replacement cost and the
average existing full title property value, expressed as a percentage of average
existing full title property value

11. Market still unrealistically priced –
homes too long on the market
Average time that a property
is on the market
Weeks and Days on the Market
20
16
15.1
12
8
4
0
2005 2006 2007 2008 2009 2010 2011
Weeks and days that the average property is on the market before being sold
Smoothed

12. FNB Valuers indicate weak demand
relative to supply
FNB Valuers Residential Market Strength
75 Indices
70
65
Index Scale 0 to 100
60
57.95
55
50
47.53
45
44.79
40
35
30
25
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11
FNB Valuers' Market Strength Index (Scale 0 to 100 where 50 indicates a balanced market)
Demand rating (scale 0 to 100)
Supply rating (scale 0 to 100)

13. The Long Property Cycle (Real
House Prices)
Affordability of housing (Using Absa HPI)
Affordability Indices 2000=100
300 5.5 year 15 year Stagnation Period 8.5 year
Boom (Abnormally Long?) Boom
Period Period
250
200
150
100
50
0
1970 1975 1980 1985 1990 1995 2000 2005
Average house price/average income ratio (Index 2000=100)

14. Commercial property tracks residential property
with lag (243% incr. since Q1 2001 vs Residential
209%)
FNB All Commercial Capital
Growth Index vs Residential Price Growth
90% 40%
35%
Year-on-year % change
30%
60%
Year-on-year %
25%
20%
30% 15%
10%
5%
0%
0%
2002 2004 2006 2008 2010
-5%
-30% -10%
FNB All Commercial Average Property Value - Year-on-year % chnage
Average House Price - year-on-year % change

15. Returns in 2011 starting to
weaken again
Total Returns (%) by Property Type
(Source: IPD)
40
% Total returns per square metre
35
30
25
20
15
10
5
0
1995 1997 1999 2001 2003 2005 2007 2009 H1 2011
All Property Office Space Retail Space Industrial and Warehouse Space

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