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Johannesburg - The June FNB House Price Index continued to show year-on-year
growth to the tune of 12.6%, the bank said on Thursday. "This is the seventh consecutive month of positive year-on-year growth,"
noted property strategist John Loos. In real terms - adjusted for consumer inflation - this translated into house price growth of 7.2% year-on-year for May, Loos said. There were, however, signs that year-on-year growth was starting to slow. "The growth acceleration from March to April was two percentage points, and from April to May 1.9 percentage points, the latest acceleration is down to 0.4 of a percentage point." While a few more month's worth of data would be needed to confirm any trend change towards lower house price inflation, it was plausible that the market was now approaching the peak in year-on-year growth for two reasons, Loos said. "Firstly, in the second half of 2009 the rate of decline began to slow and then ultimately we returned to inflation late last year. "So, as the second half of 2010 progresses the higher base effect will begin to play a role in making year-on-year growth that much tougher to achieve." Loos said that secondly, since August 2009 there had been a lack of
interest rate cuts, with only one half a percentage point cut this
year. "The impact of last year's five percentage points' worth of interest
rate cuts should begin to wear thin on demand growth, which
would ultimately begin to feed through to price growth." An exacerbating factor had been the relatively high household debt-to-disposable
income ratio - still a high 78.4 percent in thefirst
quarter. This had limited the household sector's response to last year's interest
rate cuts, Loos said. "We are thus of the belief that year-on-year growth is near to its peak, and that as the year moves to an end we will see a deceleration of house price growth back towards single-digit year-on-year rates by year-end." - Sapa. |
