Johannesburg - Some early signs were emerging of a shift towards a renewed improvement in housing and housing-related affordability, according to First National Bank (FNB).
This was despite the deterioration in housing and house-related affordability during the second quarter, FNB household and property sector strategist John Loos said.
He said house inflation was far from strong and had been slowing in the past few months, while there had been some mild decline in real house price levels in the past two quarters and the rate of increase in the average house price/per capita disposable income ratio had slowed to a snail’s pace.
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Loos said consumer price inflation also appeared largely under control, which was expected to lead to the SA Reserve Bank keeping interest rates unchanged at current levels for a lengthy period.
“This in turn could all but halt the rise in the home instalment/per capita disposable income ratio and the increase in the household sector debt service ratio,” he said.
However, Loos admitted the volatility of the rand and the looming risk of a downgrade to South Africa’s credit ratings did pose risks to expectations.
In addition, Loos stressed that they also did not believe the end was in sight to the drive by municipalities and utilities to raise rates and tariffs at a significantly faster pace than either consumer price inflation or household income growth.
FNB has two main housing affordability measures, the average house price/per capita disposable income ratio index and the instalment value on a new 100 percent bond on the average priced house/per capita disposable income ratio index. The average house price/per capita disposable income ratio index deteriorated by 0.13 percent in the second quarter of this year compared with the previous quarter.
Loos said this index had now cumulatively deteriorated by 4.8 percent from the second quarter of 2013 until the second quarter of this year.
The instalment value on a new 100 percent bond on the average priced house/per capita disposable income ratio index deteriorated by 1.27 percent in the second quarter of this year.
This index had deteriorated cumulatively by a more significant 20.6 percent since 2013 because of the interest rate hikes during the past two years.
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