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Cape Town - There are further signs of slowing in the residential property market, with the FNB September House Price Index indicating slowing growth for five consecutive months.
The September index rose by 3.4% year-on-year (y/y). This is slower than the revised 4.8% rate recorded for August. The average price of homes transacted in September was R1 056 774.
The FNB Valuers Market Strength Index also points to a softening residential market. Although the difference between demand and supply still shows a fairly well balanced residential market, the balance is deteriorating, according to the index report.
FNB expects average house price growth to hover around low single digits in the near term. This is expected to translate into a decline in real terms when adjusted for inflation. In real terms the rate of house price growth has turned negative to the extent of -1.1% y/y in August after a revised -0.3% in July.
"The turn to real house price deflation points to a deteriorating market balance between demand and supply," said FNB.
READ: Where to with house prices in SA?
The FNB Estate Agent Survey's residential activity rating has for some time also pointed toward looming weakness, both for the residential market as well as the economy.
According to the FNB report, this slowing in the market is actually a lagged response to the gradual interest rate hiking cycle which started early in 2014. The stagnation in the SA economy is named as another reason for the residential slowdown.
"The housing market can often be a good leading indicator of economic conditions. Up until May 2016, we saw month-on-month seasonally adjusted house price growth accelerate after an early-2016 dip," states the index report.
"A weakening housing market, reflected in both slowing house price growth as well as other of our key residential indicators, points to the possibility that the economy has been turning weaker once more after a brief improvement in the second quarter," said FNB.
It added that this view is backed by, for example, a recent dip in the Manufacturing Purchasing Managers Index (PMI).
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