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Mild average house price increases expected

Jan 06 2015 11:53

Johannesburg - The housing market improved somewhat in 2014 and indications are it will continue to strengthen this year, First National Bank said on Tuesday.

"Both indicators show 2014 to have been a mildly stronger year for the residential market than 2013," FNB property sector strategist John Loos said in a statement.

"As global oil and food prices slump, this exerts significant downward pressure on household sector cost-of-living increases. We believe it possible that 2015 could see still further residential market strengthening," said Loos.

The average house price for December rose 6.87% year-on-year.

"This is slightly faster than the previous month's revised 6.85%, and continues a mild accelerating trend of recent months."

Loos said when the house price growth was adjusted for consumer price inflation (CPI), it showed a "mildly positive" 0.99% year-on-year increase for November. December's CPI was not yet available.

The average house price in December was R985 405.

Loos said average house price inflation for 2014 was slightly stronger than 2013, at 7.1%, compared to 6.8%.

"This implies a third consecutive year of real house price growth."

However, when making longer term comparisons, the house price index for November was -18.7% down compared to December 2007 - the month when a peak in the last decade's real house price boom was reached.

Nevertheless, in real terms, the 2014 index was still 2.6% higher than that in 2004.

Loos said the valuers' market strength index pointed to a strengthening residential market.

The index works on a scale of zero to 100, with 50 indicating a market where supply and demand are balanced.

"The valuers as a group have for much of the past three years perceived a rise in demand, along with deteriorating supply of residential stock."

He said that in December the index rose to 50.44.

On prospects for 2015, Loos said "further mild increases" in the average house price could be expected.

"Whereas 2014 saw an average price growth rate of 7.1%, we believe it quite possible that we could move up moderately into the eight to nine percent range for 2015 on average.

"As we enter 2015, recent economic events show promise for another solid, albeit far from booming, residential property year," said Loos.

fnb  |  john loos  |  property  |  sa economy
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