Residential Property Barometer - January 2015

It was reported that 2015 could see further mild deterioration in Residential and Residential-Related affordability, if FNB’s expectations of  a slightly stronger house price inflation proves true.

John Loos, FNB Property Sector Strategist, reported that indications from 2014 showed a mildly stronger year than that of 2013 and if expectations are met in 2015, the residential property market will strengthen further.

Loos had said that the rate hike which took place in January 2014 had added pressure to the market but despite this the affordability measures remained in a much better condition than it had been back in 2007/8. 

Looking towards 2015 it is believed that certain key factors could cause further mild home and home-related affordability deterioration.

Over the past 3 years, there has been a broad improvement in residential demand relative to supply, reflected in both FNB’s Valuers’ Market Strength Index which continues to rise, as well as in a broad declining trend in the average time of properties on the market prior to sale, as per the FNB Estate Agent Survey.

While this improving market balance, and mounting residential supply shortages, are expected to bring about a resurgence in residential building completions in 2015, it is not expected that this will be in time to prevent slightly higher house price inflation this year. Therefore it is expected that there will be a further acceleration in average house price growth into the 8-9% range.

The slump in oil prices and Global food prices increases the possibility of rate hikes being shifted outwards, therefore it is expected that stronger house price inflation will cause affordability deteriorations in 2015 as opposed to interest rate hiking.

He added that real house price levels (house prices adjusted for consumer price inflation) rose slightly in 2014 as a whole, indicating that housing lost some “price competitiveness” to the competing consumer goods and services last year.

He concluded by saying that in 2015, we can expect a slow affordability deterioration, based on their projection of slightly higher house price growth in the region of 8-9%, and the expectation that average employee remuneration growth will not quite keep pace.

Download the full report here 

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