House price growth tends to be hyper-local, and certain markets can buck national trends. Picture: Pixabay
Durban - The new year could spell a moderately stronger house price growth rate following three consecutive years of slow growth.

However, FNB household and property sector strategist John Loos on Thursday warned against high expectations.

“We believe that 2018 could see a slightly stronger growth rate. From an average house price growth rate of 3.7% last year, we project the 2018 average to shift a little higher to nearer to 5%,” said Loos.

FNB’s latest Property Barometer report on last month’s FNB House Price Index showed that 2017 turned out to be the third year of national average house price growth slowdown from a multi-year high of 7%, reached in 2014. The index’s average annual growth slowed each year, to 4.8% in 2016 and then further to 3.7% in 2017.

Loos said that based on 11 months’ worth of Consumer Price Index (CPI) inflation data, this translated into an estimated decline of -2.4% in real terms (adjusting house price growth for consumer price inflation).

He attributed the three annual slowdowns to the multi-year economic growth rates with a mere 0.7% real economic growth believed to have taken place last year and a mild 200 basis points’ interest rate hike between early-2014 and early-2016, cooling the market slightly.

Loos said the FNB House Price Index performance examined on a monthly basis indicated a gradual year-on-year growth strengthening as the year progressed, having hit “rock bottom” growth late in 2016.

“From a low of 1.5% year-on-year house price growth in December 2016, the rate gradually rose to reach 6.1% in December 2017, further up from a revised 5.5% rate for November 2017,” he said.

“The prior dip in month-on-month house price growth coincided broadly with a dip in another key leading economic indicator, the Manufacturing Purchasing Managers’ Index, and in recent months the latter indicator has also been moving higher. Both are perhaps pointing to signs of a slightly stronger economy going into 2018.”

Wakefields Real Estate chief executive Keith Wakefield concurred with the assessments made and conclusions drawn in the FNB House Price Index.

“It is a good reflection of the property landscape countrywide, but clearly, with KwaZulu-Natal only comprising around 15% of the country, it does not necessarily follow that those percentages are accurate for our province.

“In fact, I’m certain that where he quotes the South African rate of house price growth at 3.7% last year, KZN figures were lower than that,” said Wakefield.

“We are seeing clear signs of an awakening property market. We believe that 2018 will show improved sales volumes and house price growth.

“There are unknown factors swirling around - from politics to weather patterns - but if there is economic stability and indeed growth it will bode well for property in KZN.”

Daily News