FNB: House prices lose momentum
Johannesburg - Although house prices continued to rise in June, the increase was losing momentum, FNB said on Monday.
The FNB house price index showed further acceleration in June, reaching 8.9% year-on-year (y/y) growth in June, compared to y/y growth of 8.6% in May.
"This is the highest year-on-year growth since June 2010," FNB said in a statement.
The recent mild resurgence in house price growth came largely as a result of a late-2011 strengthening in the domestic economy after two weak winter quarters last year.
But on a month-to-month (m/m) basis, house price growth had gradually lost momentum since January. From a peak of 1.65% in January, m/m seasonally-adjusted house price growth had slowed to 0.82% in June.
"This slowing month-on-month growth trend suggests that a peak in the year-on-year house price growth rate should be reached soon," the bank said.
"The recent month-on-month house price growth slowing also appears to be reflective of a housing market that is tracking short-term fluctuations in the economy, and signs that economic growth in South Africa is slowing."
Real economic growth on a quarter-on-quarter annualised basis had already slowed from 3.2% in the fourth quarter of 2011 to 2.7% in the first quarter of 2012.
This trend was confirmed by the FNB Valuers' market strength index, a barometer of the bank's valuers' perceptions of market strength.
The index had remained virtually unchanged at 45.93 in June, after some improvement in the five months up to and including May. This supported the recent period of more solid price growth.
In year-on-year terms, the market strength index had turned to positive growth by April, after seeing its rate of decline diminishing. This trend was in line with the improving y/y trend in house price growth.
In m/m terms, the market strength index had seen its growth rate falling from a mini-peak of 0.7% in March to zero in June - a further indication of the slowing m/m growth trend in the FNB house price index, said the bank.
Its valuers had perceived the market to have strengthened during the 2011/2012 summer, but they had also seen the pace of improvement in the market slowing in the recent months to June.
Other economic data released in recent months also suggested that the housing market was set to head into a softer patch again. Economic growth was likely to slow further in the current quarter.
"All considered, therefore, a weakening economic environment, coupled with no new interest rate stimulus (reduction) to date, suggests that the recent slowing trend in month-on-month house price growth will continue in the near term," said FNB.
This would soon translate into slowing y/y house price growth.