FNB house price index grows 2,2%

The FNB house price index has recorded 2,2% growth year on year (y/y) in April from the revised 1,2% in March.

The bank said this was the second successive month of mild acceleration in y/y house price growth, triggered by the lagged result of interest rate cuts by the Reserve Bank late in 2010.

"Those rate cuts caused a mild uptick in residential demand which may have been more than just the usual summer seasonal factors," said FNB property strategist John Loos.

In real terms, however, adjusted for consumer price inflation, the y/y decline continued to the tune of -2,8% in March.

"However, the FNB valuers' market strength index suggests that our valuers have started to see further deterioration in the strength of demand versus supply during April, after some small signs of stabilisation in preceding months of 2011. This weakening in the market balance is the combined result of a further strengthening in the supply of residential stock on the market during the month, along with a weakening in demand, according to the valuers' combined opinion," he said.

"The contrast between the valuers' combined opinion and a slight acceleration in year-on-year price growth suggests that we should not expect too much from the slight rise in price growth. What is probably being reflected in the recent house price trend is the mild residential demand improvement late in 2010, which was the result of two late-2010 interest rate cuts.

"However, the last rate cut was five-and-a-half months ago in November, and it is likely that the impact is starting to wear thin," he said. - I-NetBridge

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Denny Crane

Denny Crane
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