select
|

House price inflation slows once more.

(Article by John Loos- household and property sector strategist at FNB Home Loans)

The FNB National House Price Index rose by 6.6 percent year-on-year in August. This represents a slowing in the pace of growth from a revised 7 percent year-on-year rate in July, and the third consecutive month of slowing since the 7.4 percent revised 2016 high reached in May.

On a month-on-month seasonally-adjusted basis, the index’s rate of inflation has slowed from its 0.71 percent 2016 high point in May to 0.46 percent in August. This comes after a prior mini-surge in month-on-month house price inflation in the months leading up to May.

Month-on-month house price mini-trends often broadly track key indicators of economic performance. That recovery in month-on-month house price growth up until May more-or-less coincided with some noteworthy recovery in the Barclays Manufacturing Purchasing Managers’ Index(PMI). This, along with other indicators, pointed to some likely mild improvement in the country’s economic performance in the second quarter of 2016 after a dismal contraction in GDP (Gross Domestic Product) in the first quarter.

More recently, however, it is possible that the renewed slowing in month-on-month house price growth post-May may hint at, or reflect, renewed lull in the economy emerging in the third quarter.

In real terms, adjusting for CPI (Consumer Price Index) inflation, the house price index remained in mild positive growth territory to the tune of 0.9 percent year-on-year in July, with CPI inflation of just above 6 percent, still below house price inflation of 7 percent in that month (CPI data for August not yet available).

Our latest index estimate shows house prices in real terms as being 3.8 percent up on the post-financial crisis low point reached in November 2011, but -20.1 percent down on the boom time high reached in December 2007.

Taking a long term backward-looking view, in real terms we find the index to still be 66.8 percent higher than pre-boom levels of January 2001.

In nominal terms (current prices), the index has inflated by 302.1 percent since January 2001, and 47.1 percent since the May 2009 post-boom low-point.

The average estimated price for home transactions in August was R1 078 099.

The recent month’s house price inflation estimates remain mildly ahead of average rental inflation, according to the StatsSA CPI rental data. As yet, therefore, there has been no reversal of the gradual rise in the house price-rent ratio since 2013. The rise in this ratio gradually causes home buying to lose some appeal relative to the rental option, and can ultimately weigh on the home buying market.

However, rental inflation has gradually edged higher from 4.3 percent year-on-year in mid-2012 to 5.3 percent by June 2016. And looking forward, we remain of the expectation that average house price inflation will slow into lower single digit territory in the near term, dragged lower by the lagged impact of past interest rate hiking, weak national sentiment in a stagnant growth environment, and mounting speculation over further ratings downgrades for South Africa. This could see a near term end to the rising trend in the price-rent ratio, with the rental market beginning to outperform the home buying market by a small margin in the not too distant future.




  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 24 Apr 2018
      The thing about the property ladder is that at some point in our lives we all have reason to want to climb a rung or two higher. Sometimes, it’s because we’ve outgrown our previous dream home, or because we want to be in a better neighbourhood that’s closer to work or to schools. Sometimes it’s because our circumstances have changed, and we’re taking care of elderly parents or relatives. Sometimes, it’s just because we want a property that reflects the financial status our hard work has won.
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
        
    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