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House price hike declines

Johannesburg - The annual rate of increase in house prices slowed between January and February, reflecting the country's weak economic growth, the FNB house price index showed on Wednesday.

The slower year-on-year house price growth in February 2013, at 2.6%, reflected the lagged impact of weak economic growth in the last quarter of 2012, said John Loos, First National Bank household and consumer strategist.

The rate was 3.9% in January. The average value of homes transacted in the FNB House Price Index was R846 172 in February.

"This slowing year-on-year house price growth, to levels back below consumer price inflation, implies a recent return to declining house prices in inflation-adjusted real terms."

He said as at January the FNB House Price Index was still 58.7% higher than in July 2000, when the index started.

However, since the revised real price peak reached in November 2007, real price levels had declined by 19.5%.

In nominal terms, the index was 216.9% higher than July 2000, but only 9.5% above what it was in November 2007.

Loos said the bank expected the recent slowing in year-on-year growth to end soon, as the lagged impact of mildly improved economic times took effect in the housing market.

"However, the expectation that house price growth will remain in lower single-digit territory for the year, below consumer price inflation and thus negative in real terms, still holds," he said.

FNB expected no further interest rate reduction in 2013, although economic growth was expected to be better than it was in late 2012.


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