SA house price growth slows further

SA house price growth slows further

The South African residential property market seems to be reflecting recent economic weakness, with house price inflation slowing yet again.

FNB expect interest rate hiking may resume later in 2015, as opposed to previous forecasts of early-2016. " This leads us to revising our own expectations for average house price inflation downward for 2015. We started the year expecting 8-9% average house price increase for this year, but now expect an average nearer to 5%," say John Loos, household and property sector strategist, and Theo Swanepoel, property market analyst, at FNB.

According to the FNB House Price Index, the average house price for March 2015 rose 5.3% year-on-year. This is slightly slower than the previous month’s revised 5.6% and continues the slowing year-on-year price inflation trend of recent months.

Despite the nominal inflation slowdown, however, house prices in recent months continue to grow positively in real terms, when adjusted for CPI inflation. As at February (March CPI stats not available yet), real house price inflation was 1.7% year-on-year, kept in positive territory by a sharply lower CPI inflation rate of 3.9%.

The average price of homes transacted in March was R994 718.

In terms of the outlook for the property market, it is still possible that some positive impact from the low inflation environment may yet feed through into the economy, and into real household disposable income growth in the near term, say Loos and Swanepoel. "However, at this stage it does appear that a host of negative factors have at least in part worked against the 'economic positives', and early-2015 economic data releases were disappointing.

"Apart from the already-mentioned electricity issues and weak export commodity prices, significant effective personal tax rate and fuel levy hikes now have to impact the household sector too."

This economic weakness suggests "limited further strengthening potential" for the residential market in the near term.

Source: Property24