Slowdown in property market to taper off
THE First National Bank (FNB) house price index and the Standerd Bank residential property report released yesterday both showed that house prices continued to decline, but with the latter hinting that the rate of decline may be starting to slow.
The FNB index showed a continued decline last month of 9,5%, slightly better than the revised 9,7% in June. However, FNB property strategist John Loos warned yesterday that the slowdown did not mean a sustainable national price increase just yet.
“ For the time being this means a possible slowing in the rate of price decline. This comes after a period of continuously declining price inflation, and more recently accelerating price decline, which spans back to the beginning of last year,” Loos said.
He said a turning point in house price deflation at about midyear had been expected, and it was possible that the slightly lesser rate of year-on- year decline in the FNB house price index may be an indication of the start of some “levelling out”.
“Admittedly, we shall have to wait another few months to get a better idea of whether or not this really is the start of a trend of diminishing price decline which would ultimately lead to a return to price inflation,” he said.
Meanwhile, the Standard Bank residential property report showed for the first seven months of this year an average monthly decline of 3,8% in the median house price.
Standard Bank property analyst Johan Botha said the trend cycle of the last month’s data confirmed that median house prices were still declining and that the weakness in the property market was set to continue.
“The July smoothed data yielded a rate of contraction of -4,9% compared to a year ago — the same as in June. In real terms, using our estimate of the consumer price index last month to deflate the nominal house price, the decline in real house prices comes to approximately 11,7%,” Botha said.
He said the smoothed growth rate for last month showed that the median value of the residential properties financed by Standard Bank was R540000. “The overall growth in the economy, the level of household income and debt, as well as the medium-term economic and financial outlook, are such that a clear and immediate improvement in the housing market is unlikely,” Botha said.
Article by: Business Day