FNB Property Barometer - Lower property price growth forecasted

The latest FNB House Price Index for 2015 as a whole showed an average growth of 6% and continues the steady downward trend from 2014 and will continue in 2016. 

FNB said that they believe that recent mild uptick in year-on-year house price growth late in 2015 will be short lived, and 3 months of slowing month-on-month house price growth, already, suggests that this will probably be the case.

Adding that they rather, believe that the slower overall average house price growth rate in 2015, compared to 2014, was the start of a broader trend towards low single-digit house price growth in the near future, and that the 2nd half of 2015 “bump” in house price growth was temporary.

And although oil prices remain well-behaved, a weak rand and a drought-driven rise in food prices are adding to the economic pressures and not overly-positive economic prospects as we head into 2016. South Africans should also prepare for a lift in CPI inflation which would lead to the SARB to continue to hike interest rates gradually further through 2016. It can be said that the performance of the residential property market in 2016 will be inextricably linked with the performance of the economy.

Rising interest rates, along with depressed export commodity prices, is expected to lead to still further slowing in real economic growth from an already stagnant rate of around 1.5% last year.

With the risk of recession significant, and slow positive growth appearing to be the best scenario, there appears little to support average house price growth at recently positive real rates as we enter 2016. 

FNB therefore sees a move slower in year-on-year house price inflation towards the 4-5% range later in 2016.

Read the full report here

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