House prices still on the up

Johannesburg - January was the third successive month to show a year-on-year increase in house prices after almost a year of decline, FNB property strategist John Loos said on Monday.

"This reflects a modest start to 2010, but more importantly an improving trend," he said.

Loos's comments followed the release of FNB's House Price Index which showed a further acceleration in year-on-year inflation, from a revised 2.3% in December to 3.1% in January 2010.

However, there was little changes to his expectation that price inflation would not go further than single digits "with a household sector still under significant financial pressure, and the belief that interest rates are at or near to the bottom".

In real terms, Loos said, the market was not yet quite out of the woods, with the real (adjusted for consumer price inflation) house price decline persisting on a year-on-year basis to the tune of -3.8%.

The "downward stickiness" of consumer price inflation was a contributor to the ongoing real price deflation, Loos said.

In December 2009, consumer price inflation rose mildly to 6.3% year-on-year, from 5.8% in November, thus keeping well ahead of house price inflation for the time being.

Loos said essential buying was tops in the current recovery and luxury buying was far from being on a firm footing.

"The essential buying focus hampers the pace of recovery in areas such as coastal holiday towns, where a far greater percentage of residential buying is typically for non-essential holiday purposes," he said.

- Sapa