The FNB House Price Index for February showed further slowing in its year-on-year (y/y) inflation rate from a revised 3.9 percent in January to 2.6 percent with the average value of homes transacted reaching R846 172.
Writing in the report, FNB household sector and property strategist John Loos says this continues a mild slowing growth trend from a ?mini-peak? of 7.7 percent growth reached in July and August 2012.
?This slowing year-on-year house price growth, to levels back below consumer price inflation, implies a recent return to declining house prices in inflation-adjusted real terms,? he says.
Loos says in January, the combination of a CPI inflation rate of 5.4 percent y/y and a 3.9 percent nominal house price growth rate in that month, translated into a real y/y of -1.35 percent in the FNB House Price Index.
Monitoring longer term performance of the index, we see that in real terms, as at January the FNB House Price Index was still 58.7 percent higher than in July 2000 when the index started.
Since the revised real price peak reached in November 2007, real price levels have declined by -19.5 percent and in nominal terms, the index is 216.9 percent higher than July 2000, but only 9.5 percent above November 2007, he explains.
According to Loos, movements in house price growth suggest over the past year to year-and-a-half that the best rate of improvement was to be found back in the first half of 2012, around the time when the economy was going through a relatively strong growth period. The slowing growth more recently perhaps reflects the slower economic growth period of the second half of the year.
He notes that it was a relatively strong economic period through the summer of 2011/12 to mid-2012 that aided a noticeable improvement in the housing market and house price growth.
During the second half of 2012, a slower domestic economy, hampered by widespread industrial action disruptions to production, was arguably instrumental in causing a slower pace of price growth in the second half of 2012 and early-2013, points out Loos.
?We have started to see the economic growth situation normalise from a lowly 1.2 percent quarter-on-quarter annualised growth in real gross domestic product in Q3 2012, accelerating mildly to 2.1 percent in Q4.?
The bank expects the recent slowing in y/y growth to come to an end soon, as the lagged impact of mildly improved economic times takes effect on the housing market.
However, the expectation that house price growth will remain in lower single-digit territory for the year, below consumer price inflation and thus negative in real terms still holds, says Loos.
Meanwhile, the Absa House Price Index shows improvement in the value of homes in the middle segment.
Jacques du Toit, Absa Home Loans property analyst says price growth in the middle segment of the market recorded 10.2 percent y/y in February after rising by a revised 9 percent y/y in January. Real price growth was 3.5 percent y/y in January, he says.
According to Absa, the average nominal value of small homes (measuring 80 to 140 square metres) was R776 700, medium-sized homes (141 to 220 square metres) R1 076 800 and large homes (221 to 400 square metres) was R1 575 400.
Du Toit says although nominal y/y house price growth is on an upward trend, price growth for the full year is projected to remain in single digits, which will be the result of monthly price growth still slowing down and expected to be reflected in y/y price growth later this year.
?In real terms house prices are forecast to remain under pressure in view of consumer price inflation forecast to rise to above 6 percent this year,? adds Du Toit.? Denise Mhlanga