FNB house price index increases

The FNB house price index showed mild acceleration in its year-on-year average house price in June, from a revised 6.2 percent in May to a 6.6 percent rate in June, the financial services group said on Tuesday.

"The renewed acceleration in house price growth, which resumed early in 2013 after a lull late in 2012, continued in the June version of the FNB house price index," the group said in a statement.

In real terms, adjusted for consumer price inflation, as at May there was a "very slight" year-on-year increase of 0.61 percent, with consumer price inflation at 5.6 percent year-on-year in that month being slightly lower than house price inflation.

The index's average price of homes transacted was R891,266.

In real terms the index was 18.6 percent down on last decade's real price peak reached in November 2007.

In nominal terms, prices were 15.7 percent higher.

"However, compared to June 2003, 10 years ago, the index is up 44.8 percent in real terms and 148.8 percent in nominal terms," the group said.

"(This suggests)... that the price effects of last decade's residential demand boom have far from worn off, despite a significant downward real correction since late-2007."

The group said that despite the recent improvement, the housing outlook could still remain mediocre, with the economy under "significant pressure".

It said the key release in June was the SA Reserve Bank's (SARB's) Quarterly Bulletin, which confirmed that real household disposable income growth had slowed further in the first quarter from the prior quarter's 2.4 percent quarter-on-quarter annualised rate, to 2.2 percent.

"This has a bearing on residential buyer purchasing power growth, and largely explains the recent steady deterioration in consumer confidence in recent quarters," it said.

"The current level of interest rates set by the SARB is at multi-decade lows, and indeed the stability of interest rates at these low levels has helped to gradually strengthen residential demand through 2012 and early-2013."

The group said it was, however, "questionable" whether this strengthening of residential demand could continue at a time of "clear economic weakness".


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