select
|

House-price growth slows according to FNB

House price data suggests that a period of economic weakness in South Africa may re-emerge after a slightly stronger performance a few months ago.

John Loos, a household and property sector analyst at First National Bank, said it also appeared increasingly likely that 2017 would be the third consecutive year of slowing average annual house-price growth and the second consecutive year in which house prices would decline in consumer-inflation-adjusted, or real, terms.

Loos said month-on-month seasonally adjusted house-price growth suggested renewed weakness in the economy.

He said seasonally adjusted growth accelerated month-on-month from late last year to a high of 0.88 percent in March this year.

But Loos said slow growth was evident from April to 0.04 percent this month.

"This renewed month-on-month house-price-growth slowdown has been accompanied by a significant dip in the Manufacturing Purchasing Managers' Index (PMI) in April and in June," he said.

Loos said dips in month-on-month house-price growth often coincided with a slowdown in the PMI, suggesting that both variables tracked the economy quite closely.

He said the renewed slowdown in month-on-month house-price growth had been accompanied by a resumption of a month-on-month decline in the South African Reserve Bank's leading business cycle indicator in recent months.

The leading indicator has declined month-on-month for three consecutive months to May, after increasing for the previous seven months.

Loos said the average year-on-year house-price-growth rate for the first seven months of this year was 2.8 percent, which was significantly lower than the 5 percent recorded for the past calendar year and well down on the post-2008/9 recession high of 7.2 percent.

He said real average year-on-year house-price growth weakened to -2.9 percent in the first six months of this year from the -1.2 percent decline last year.

Loos said that, by June this year, real house prices had declined -4.5 percent since the post-2008/9 recession high in December 2015 and 19.3 percent from the all-time high in June 2007.

However, Loos said that, despite a mediocre performance in recent years, the average real house price was 63.8 percent above the level reached at the end of 2000, just before house-price inflation started to accelerate rapidly.

Loos added that, without adjusting house-price growth for inflation, the average house price this month was 314.8 percent higher than the level at the end of 2000.

By comparison, the price of consumer goods and services, as measured by the Consumer Price Index, was 153.7 percent higher over virtually the same period, he said.

But Loos said the continuing price correction in inflation-adjusted house-price growth was essential, because South Africa had moved to having an economy with almost zero growth.

"We believe that high real house prices will have to decline significantly to reflect this longer-term economic weakness that appears to have set in," he said.

Loos said the onset of interest-rate cutting by the Reserve Bank was a possible stimulus for house-price growth, although the 0.25 percentage point cut in the repo rate last month would be insufficient to move the housing market significantly.

But if this reduction in the repo rate was the start of a series of cuts, it was conceivable that house-price growth next year could be mildly stronger than the year-to-date average year-on-year price growth rate of 2.8 percent, he said.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    • 22 Nov 2017
      While sales have noticeably slowed in most sectors in most Cape town suburbs, the security estate sector in Constantiaberg has bucked the trend by remaining buoyant, with sales by August this year already surpassing total sales in 2016.
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
        
    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