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House price growth at 2-year high

May 02 2012 11:28 Sapa

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Johannesburg - House prices in April showed the highest year-on-year growth since June 2010, according to the FNB House Price Index released on Wednesday.

"The FNB House Price Index showed a further acceleration in April, up from a revised March growth rate of 8.1% to 8.6% year-on-year," FNB Home Loans strategist John Loos said in a statement.

"This is the highest year-on-year growth since June 2010."

However, real houses prices - where the price is adjusted for inflation - were 12.6% lower in March than at their peak in February 2008.

Since the inception of the index in July 2000, house prices in real terms had increased 70.3% by March 2012.

Nominal prices - which do not factor in inflation - were 231.7% higher in April 2012 than prices in July 2000.

Loos said various factors contributed to the improvement in house prices in April.

"The recent support for a moderately improved residential market comes in part from a possible greater willingness of banks as a group to provide home loans.

"However, we believe that it is also very much to do with a recent improvement in real economic growth, which in turn supports employment and household disposable income growth."

He said the lagged impact of earlier positive developments could also have played a role. It was too soon to suggest house prices were set to show much better growth, Loos warned.

"Given the current fragility in the world economy, and evidence pointing to global economic growth slowing once again, it appears too early to expect a sustained move to higher house price growth in South Africa."

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