Year-on-year house price growth has steadily slowed over past 7 months

According to the latest report from FNB, the House Price Index continued to cling onto low positive year-on-year growth during November 2016

However, the rate of year-on-year growth has been slowing steadily, and on a month-on-month basis the index has already been in mild deflation for the past 4 months.

FNB says that this weakness was not too surprising, given other FNB non-price indicators that have for some time been pointing to weakening demand and residential activity levels. 

After a lengthy period of weakening “signals” in the housing market dating back into 2015, the slowdown in year-on-year house price growth has “sped up” considerably. Year-on-year, house price growth still shows slightly positive readings, but on a month-on-month basis the FNB House Price Index has had a 4th month bout of deflation.

The readings of the index are not too surprising, given the multi-year stagnation in the South African economy to where growth this year is likely to have been near to zero. The lagged impact of interest rate hiking, too, is probably still filtering through. 

On top of this, recent readings of the FNB Consumer Confidence Index have pointed to consumers expressing concern regarding future economic performance. While they expect the alleviation of drought conditions to boost agricultural growth in 2017, and some support from mildly better export commodity price to assist mining, our forecast economic growth rate of 1% is unlikely to make a meaningful difference to residential demand. 

We therefore expect little in the way of residential supply constraints in 2017, resulting in a year of low house price inflation averaging near to 3%. This would translate into an average house price decline in real terms for 2017, when adjusting for CPI inflation.

Download the full report here : Property Barometer November 2016

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