Residential property prices remain in decline despite a short burst of confidence that pushed prices up in the first quarter of 2018 according to the latest FNB Property Barometer released this week.

FNB household and property sector strategist John Loos said the FNB House Price Index saw prices grow at 4.1% in June, up from price acceleration of 3.8% in May and a low of 2,9% in February, marking the fourth consecutive month of house price growth acceleration.

However, in real terms prices, are still deteriorating and signals from the FNB Estate Agent Survey suggested that the acceleration in house price growth may be short-lived.

“We believe this recent mild acceleration in house price growth to be the lagged impact of that brief sentiment improvement in the country early in 2018 on the back of the major political leadership changes in the country, notably a change in president. That sentiment improvement led to a noticeable first quarter increase in residential market activity and demand according to the FNB Estate Agent Survey and this has arguably fed through into price growth of late,” Loos said.

But when taking inflation into account prices are dropping.

“When adjusting for Consumer Price Index inflation, house prices remain in decline. As at May 2018 - June CPI is not yet available - real house prices declined year-on-year by -0.5%, with CPI inflation at 4.4% in that month and house price growth at 3.9%,” Loos said.

The FNB Estate Agent Survey also pointed to market weakening with agents reporting a significant drop in residential market activity in the May 2018 quarterly survey, after a first quarter “spike”. Agents surveyed were asked to rate market activity on a scale of one to 10.

According to the barometer, homes are also taking longer to sell. The average time of homes on the market prior to selling is now 16 weeks and four days, compared to the first quarter when it took 14 weeks and one day to sell.

“The signs are increasingly pointing to an even slower average house price growth year in 2018, than in 2017, and possibly the fourth consecutive year of house price growth slow down, despite a recent mild growth acceleration,” Loos said.

“Whereas we had expected a little more early in 2018, originally projecting an average 5-6% house price growth rate for the year, the short-lived nature of that early-2018 national sentiment “spike” leads us to adjust our average house price expectation for 2018 lower into the 3-4% range.”

Property prices grew on average by 4.2% in 2017.