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FNB Property Barometer – March 2015

According to the latest statistics from First National Bank (FNB), the housing market is seemingly continuing to reflect recent economic weakness, with house price inflation slowing yet again

The weakness in the housing market coupled with the SARB (Reserve Bank) announcements at the Monetary Policy Meeting has led FNB to revise their own expectations for 2015. FNB had started the year expecting 8-9% average house price increase for this year, but now expect an average nearer to 5%.

According to the FNB House Price Index, the average house price for March 2015 rose 5.3% year-on-year. This is slightly slower than the previous month’s revised 5.6%, and continues a slowing year-on-year price inflation trend of recent months.

Moving on to the seasonally adjusted month-on-month house price inflation rate, a better indicator of recent growth momentum than the year-on-year rate, the early-2015 “soft patch” in the rate of strengthening in the housing market is strongly reflected. 

The average price of homes transacted in March was R994,718.

Examining the longer term real house price trend (house prices adjusted for CPI inflation), we see that despite some rise in recent years, the average real house price level remains -17.2% below the high reached in December 2007 at the back end of the residential boom period. Looking back longer though, the average real price remains 66.2% above the January 2001 level, a time back just before boom-time price inflation started to accelerate rapidly.

It is still possible that some positive impact from the low inflation environment may yet feed through into the economy, and into real household disposable income growth in the near term. However, at this stage it does appear that a host of negative factors have at least in part worked against the “economic positives”, and early-2015 economic data releases were disappointing. Apart from the electricity issues and weak export commodity prices, significant effective personal tax rate and fuel levy hikes now have to impact the Household Sector too.

It would seem that economic weakness is reflected in certain of the FNB residential property data, notably house price inflation, suggesting limited further strengthening potential for the residential market in the near term.

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