select
|

FNB forecasts slower growth in property demand

House price growth, after adjustment to take account of the impact of inflation, is expected to be negative at minus 1 percent next year compared with projected positive 0.9 percent growth this year, according to First National Bank (FNB).

Real house price growth is expected to be negative next year despite slightly higher economic growth compared with this year.

John Loos, a household and property sector strategist, said yesterday that FNB was forecasting slower growth in residential market demand this year because growth was expected to be constrained by a still weak economic growth rate and higher interest rates since early last year and further possible rate hiking later this year.

Loos said this slower growth in residential demand was reflected in the forecast 0.9 percent growth in the FNB valuers demand strength rating compared with 7 percent last year. He said some growth was expected in residential supply after the decline in the FNB valuers supply rating over the past two years.

Loos said the net result of slowing demand growth and a return to positive supply growth would be a slower rate of increase in the FNB valuers market strength index to 0.4 percent this year from 5.5 percent last year, before turning negative at 0.5 percent next year.

However, Loos said FNB was forecasting a slight acceleration in average house price growth to 5.6 percent next year from the anticipated 5.3 percent this year.

"The reasoning behind this apparent irony has to do with the general inflationary environment 'dipping' in 2015 and expected to recover in 2016.

"The result of an expected higher CPI (consumer price index) inflation rate in 2016 is the forecast of a higher average wage inflation rate next year compared with 2015, which could drive a slight renewed acceleration in nominal house price inflation too," he said.

Rental market

However, Loos said the projected slowing pace of market strengthening was reflected in FNB's real house price growth forecast, which was positive at 0.9 percent for this year and down from 1 percent in 2014, but turning negative to minus 1 percent in 2016.

Loos stressed that the slower growth in the residential market did not refer to the rental market. There could be a mild pick up in rental inflation should interest rates resume their rise later this year.

Loos said this would fuel rental demand by encouraging some aspirant first time home buyers to rent for longer and "wait it out", and cause a higher number of sellers under financial pressure to scale down to a rental property as opposed to "buying down".


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 17 Nov 2017
      FWJK has announced the launch of its latest residential brand, the Lil’ Apple, which will be launched simultaneously in two developments in Cape Town and Umhlanga totaling 600 apartments. The Lil’ Apple is set to be a brand of FWJK’s New York style apartments which will be rolled out nationally.
    • 17 Nov 2017
      It’s been a tumultuous year on many fronts, with socio-political uncertainty setting the tone for much of South Africa’s economic activity yet despite this and seemingly counter-intuitively, the residential property market has held up well.
    • 17 Nov 2017
      The EAAB (the Estate Agency Affairs Board) recently claimed that around 50,000 illegal estate agents could currently be operating illegally.
    • 16 Nov 2017
      Penthouses are synonymous with New York – characterised by high-rise living that is decidedly luxurious and spacious. While exclusivity comes at a price, you can still create a “penthouse” look and feel in your existing apartment or even the upstairs bedroom of a double storey house with some clever design changes and styling touches.
    • 16 Nov 2017
      The area has long been popular with kite surfers and, with escalating property prices in Cape Town itself, is increasingly in demand with home owners who work in town, but are looking to invest in more affordable properties.
    • 16 Nov 2017
      Cape Town’s popularity as a world-class tourist destination has resulted in a spike in the number of homes available for holiday lets and fuelled investor demand for sectional title units with short term rental potential.
    • 15 Nov 2017
      Sappi, one of South Africa’s oldest global companies and a leading global supplier of sustainable woodfibre products, has moved its global and regional headquarters to a new site on the corner of Oxford and 14th Avenue in Rosebank.
    • 15 Nov 2017
      There’s an old saying in real estate that you should seek to make a profit when you buy, not only when you sell – and a large part of succeeding at that endeavour is buying a home in an area with desirable features that will enhance the resale value of your property.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK