Johannesburg - Demand for residential property slowed in
2011 and is not expected to improve in 2012, First National Bank said on
"2011... saw slowing growth in residential demand, with
economic growth slowing noticeably in the middle two quarters of the
year," FNB home loans strategist John Loos said in a statement.
The 2011 average house price was R802 988 - 3.1% higher than
the average 2010 price of R779 041.
However, when adjusting for consumer price inflation (CPI),
the average house price declined by about 1.9%.
The December CPI was not yet available, but Loos said
average CPI for 2011 would appear to be about 5%.
"This is a return to real price decline after a mild
real average price increase of +1.7% in 2010," he said.
The FNB Valuers' Market Strength Index showed a weakness in
demand for residential property relative to supply in 2011.
"We enter 2012 with a residential market showing strong
supply relative to demand, and a mediocre economic performance at best.
"Nothing obvious pops up to suggest that this will
change radically in 2012."
The SA Reserve Bank (Sarb) could cut interest rates in 2012,
"We have seen the Sarb cutting very slowly since
late-2009, despite a weak economy, suggesting that it is now a reluctant cutter
of interest rates.
"We wouldn't expect any different in 2012, and any
reduction would be a minor one, probably not making a major difference to
residential demand," he said.
Loos predicted that house prices would decline in real terms
- taking out the effect of inflation - by about 3% in 2012, assuming
an average CPI inflation rate of 5%.
The more affordable segments of the housing market were
predicted to outperform the higher priced segments this year.
"High transport costs due to high fuel prices and
looming tolls can support demand in close proximity to key business
nodes," Loos said.
He also expected smaller homes to be more popular due to
their lower running costs.