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The FNB House Price Index fell slightly to an average 3.7 percent in February, below the 4 percent in January and the 3.9 percent average of last year. 

The 3.7percent level is also below FNB’s forecast CPI Inflation rate of 4.2 percent in February, FNB economist Siphamandla Mkhwanazi said yesterday. 

The trend of house prices remaining mildly below CPI inflation, or losing value in real terms, has continued since early 2016, said FNB property sector strategist John Loos. 

Macroeconomic fundamentals point to a “muted” property market in the near term, with house price growth expected to range between 3.5 to 4.5 percent, against FNB’s average annual inflation forecast of 4.7percent in 2019, said Mkhwanazi. 

A further weakening of the FNB Valuers’ Market Strength Index (MSI) in February indicated a deteriorating demand-supply balance, he said. 

The FNB MSI fell by 2.2percent to reach a reading of 49.51points, keeping it below the 50points mark for the ninth consecutive month. 

“This below-50points reading means that valuers rate residential supply as stronger than demand. These trends aptly explain the declining real house prices and suggest the market remains slightly in favour of buyers,” said Mkhwanazi. 

This was further indicated by the FNB Estate Agents Survey, which showed that between 2016 and 2018 the proportion of properties sold below asking price averaged 91.6 percent, compared to an average of 85.2 percent three years prior. 

“Much will hinge on the evolution of economic fundamentals, particularly employment growth, and whether the current consumer reticence lifts after elections,” said Mkhwanazi.

A decline in the estimates of first-time buyers may also be one of the factors limiting the recovery of the housing market. 

Loos said there appeared to be no macro-economic government policy changes or shifts that might lift consumer and business confidence that it would result in above inflation rate increases in average house prices this year. Stats SA’s Residential Building Statistics pointed to a rebound in building activity (completions) in 2018. 

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