Residential property market improving - FNB

Signs were emerging of growing residential market strength, according to FNB.

While year-on-year growth in house prices was still slowing in the first quarter of this year because of the high-base effect of a year ago, quarter-on-quarter house price growth had just started to show early signs of improvement in the first quarter of this year, John Loos, a household and property sector analyst at FNB, said yesterday.

The FNB house price index has risen by 19.1 percent since May 2009 until last month. May 2009 is the month that marked the end of the period of significant house price deflation linked to the 2008/09 recession.

However, Loos said the increase in house price growth, adjusted to take account of the impact of consumer price inflation, over this "post-recession" period until February this year was a mere 0.3 percent.

The FNB house price index for last month slowed further in its year-onyear inflation rate to 2.2 percent from a revised 2.9 percent in February.

Loos said this continued a mild slowing growth trend from a "minipeak" of 7.7 percent growth reached in July last year. He added that a relatively solid period of house price growth in the first half of last year created a high-base effect, and it was this high and rising base effect that was a key contributor to low and slowing year-on-year growth in the early stages of this year.

Loos stressed this slowing year-onyear house price growth did not yet reflect what appeared to be some signs from other FNB indicators of growing residential market strength. These included perceptions by estate agents in FNB's estate agent survey that residential demand improved noticeably in the first quarter of this year, while the percentage of agents citing residential stock constraints also increased, suggesting an improved balance between demand and supply.

However, Loos said they had not yet seen sustained declines in the "stilllengthy" estimated average times that properties remained on the market before being sold, or in the percentage of sellers having to drop their asking price. But he stressed that should higher demand and significant stock constraints be sustained, such declines could ultimately be expected to occur.

Loos said FNB's house price index improved quarter on quarter to mildly positive growth in the first quarter of this year, after a brief decline in the previous quarter. He said a further acceleration was expected in the second quarter, which would translate into a rise in year-on-year price growth at a later stage this year.

(Business Report)

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