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Johannesburg - House prices grew only slightly for February, according to the FNB House Price Index released on Tuesday.
"The February 2011 FNB House Price Index showed further slowing in year-on-year (y/y) growth to a mere 0.2%, down from the previous month's revised 1.3% increase," FNB Home Loans strategist John Loos said in a statement.
In real terms, that is adjusting for consumer price inflation, the January average house price showed a y/y decline of 2.3%.
This was because the 1.3% nominal increase - where the effects of inflation are not taken into account - was significantly lower than the 3.7% consumer price inflation rate in January.
Loos said this slowing growth rate was not a result of recently increasing consumer price inflation, interest rate risk and economic risks.
"To the contrary, 2010 proved to be a relatively good economic year compared to 2009, with last week's GDP (gross domestic product) release showing that the economy had grown by 2.8% following a 1.7% contraction the year before."
Real disposable income growth had outstripped economic growth due to high wage increases and low consumer price inflation, he said.
Loos attributed the weakening price growth to a lack of interest rate cut stimulus since August 2009.
Since then the SA Reserve Bank (Sarb) had "slowed the pace of its interest rate cutting to a snail's pace".
This, combined with a high degree of pressure on household finances due to low income growth and a high level of debt, had kept residential demand relative to supply "unbalanced" since 2008.
There may be further pressure on the residential market in 2011.
Real disposable income could grow at a slower rate and inflation could rise due to the surge in oil prices caused by the political turmoil in the Middle East.
Global food prices may also continue to rise.
"These global events would suggest a further rise in consumer price inflation through 2011, enhancing the risk of interest rate hiking."
Loos said they expected a house price decline of about 1% for the year.
"The February 2011 FNB House Price Index showed further slowing in year-on-year (y/y) growth to a mere 0.2%, down from the previous month's revised 1.3% increase," FNB Home Loans strategist John Loos said in a statement.
In real terms, that is adjusting for consumer price inflation, the January average house price showed a y/y decline of 2.3%.
This was because the 1.3% nominal increase - where the effects of inflation are not taken into account - was significantly lower than the 3.7% consumer price inflation rate in January.
Loos said this slowing growth rate was not a result of recently increasing consumer price inflation, interest rate risk and economic risks.
"To the contrary, 2010 proved to be a relatively good economic year compared to 2009, with last week's GDP (gross domestic product) release showing that the economy had grown by 2.8% following a 1.7% contraction the year before."
Real disposable income growth had outstripped economic growth due to high wage increases and low consumer price inflation, he said.
Loos attributed the weakening price growth to a lack of interest rate cut stimulus since August 2009.
Since then the SA Reserve Bank (Sarb) had "slowed the pace of its interest rate cutting to a snail's pace".
This, combined with a high degree of pressure on household finances due to low income growth and a high level of debt, had kept residential demand relative to supply "unbalanced" since 2008.
There may be further pressure on the residential market in 2011.
Real disposable income could grow at a slower rate and inflation could rise due to the surge in oil prices caused by the political turmoil in the Middle East.
Global food prices may also continue to rise.
"These global events would suggest a further rise in consumer price inflation through 2011, enhancing the risk of interest rate hiking."
Loos said they expected a house price decline of about 1% for the year.
