Share

House price inflation slows - index

Cape Town - The FNB House Price Index for July 2016 rose by 7.1% year-on-year.

"This is slightly slower than the revised 7.2% rate recorded for June, which may be the start of a turning point in house price inflation after some mild acceleration in prior months," said FNB household and property sector strategist John Loos.

He added that in real terms, when adjusting for Consumer Price Index (CPI) inflation, the rate of house price growth remains mildly positive, having recorded 0.9% in June, the result of a combination of 7.2% average house price inflation and 6.3% CPI inflation.

"Mildly positive real house price inflation continues to suggest a market still very well balanced between supply and demand," said Loos.

"However, many of our other non-price housing market indicators have pointed to a broad slowdown, raising the risk that the market can move slowly away “equilibrium” in the near term."

The average price of homes transacted in June was R1 082 605.

"Examining the longer term real house price trends (house prices adjusted for CPI inflation), we see that the level as at June 2016 was +5.7% up on the October 2011 post-recession low."

However, the average real house price level remains -18% below the all-time high reached in December 2007 at the back end of the residential boom period.

Looking back further, Loos said the average real price currently remains 66.9% above the End-2000 level, around 15.5 years ago, and a time back just before boom-time price inflation started to accelerate rapidly.

"We therefore still regard current real price levels as very high."

In nominal terms, when not adjusting for CPI inflation, the average house price in June 2016 was 305% above the end-2000 level.

Meanwhile, the FNB’s valuers, in their FNB Valuers Market Strength Index (MSI) edged slightly weaker in July 2016.

"Examining the Demand Rating, Supply Rating and MSI itself, which reflects the difference between Demand and Supply, we see a still well balanced residential market."


The Valuers’ Residential Demand Rating was at a level of 54.51 in July (scale 0 to 100), while the Supply Rating was at a lesser 53.18. This translates into an MSI of 50.67, with the level of above 50 implying that residential demand is still perceived to be stronger than supply.

However, Loos said the rate of change in the indices is often insightful too.

On a month-on-month seasonally-adjusted basis, the revised Residential Demand Index has been in decline since July 2015. The rate of decline diminished from November 2015 to May 2016, reaching an almost insignificant rate of decline of -0.04% in May.

"This diminishing rate of decline in demand contributed to a diminishing rate of decline in the MSI, too, and this appears to tie in with the period prior to June in which we saw a mild acceleration in average house price growth," he said.

"However, in June and July we saw the pace of decline in the Demand Rating as well as the MSI picking up speed, once more, which in turn may point towards further slowing in house price inflation to come in the near term."

Read Fin24's top stories trending on Twitter:
We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.93
+0.0%
Rand - Pound
23.90
+0.0%
Rand - Euro
20.40
+0.1%
Rand - Aus dollar
12.33
+0.1%
Rand - Yen
0.13
-0.0%
Platinum
908.05
+1.2%
Palladium
1,014.94
+1.3%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders