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Politics threatens housing market

Economy
Pretoria - The key risk to the recovery in house price growth remained how recent political and policy developments, including the major cabinet reshuffle and subsequent ratings downgrades, played out on sentiment within the household sector and housing market, according to FNB.

The bank reported this week that its house price index last month showed some further acceleration in year-on-year growth, compared with the previous month after the “dip” late last year.

John Loos, a household and property sector strategist at FNB, said the acceleration in house price growth last month was in line with recent signals of renewed strengthening in the economy.

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House price growth last month was in line with strengthening in the economy, says FNB. Photo: Nicholas Rama

Loos added that FNB’s house price data for last month would not yet show any potential impact on sentiment emanating from the recent cabinet shuffle, the removal of Finance Minister Pravin Gordhan and the subsequent ratings downgrades.

“We will have to wait for the next few months to assess this,” he said.

But Loos said that given the widespread publicity that such policy developments were receiving, it was conceivable that they could have an impact on consumer and household sentiment and cause a more cautiously spending consumer to emerge.

“This could be a dampener for the housing market in coming months should it prove to be the case.

Read also: FNB reports mild rise in secondary home buys

“For these risk reasons, we are not in a hurry to alter our mediocre average house price growth forecast of 3 percent for the entire 2017, despite recently strong year-on-year numbers,” he said.

FNB said the year-on-year growth rate of its house price index accelerated further last month to 5.5 percent from 4.1 percent in March.

The average price of homes transacted last month was R111 7338.

However, FNB said the year-on-year rate of house price change remained negative after adjustment for consumer price inflation (CPI) at negative 1.9 percent year-on-year in March this year.

The bank said this was the result of a combination of the 4.1 percent average house price inflation and 6.1 percent CPI inflation in March.

However, Loos said the magnitude of the year-on-year house price deflation in real terms had begun to diminish and there had been some month-on-month increases in the past three months.

The average real house price level was now negative 21.3 percent below the all-time high reached in December 2007.

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