Surprise acceleration of house prices

I always look at the volume of transactions, rather than the value thereof in order to assess the health of the market.  Of course, the value is important because it is on that basis that you evaluate the performance of an investment but when the volumes pick up it indicates a renewed interest in the markets that will eventually translate into a more sustainable increase in value.

Before all the economists take me to task, I must emphasize that is just an opinion and I have no empirical evidence to support my view.  It is just from experience that I know that when there was a significant and continuous increase in prices, this coincided with large volumes of transactions going through the Deeds Offices of South Africa.

I don't have the latest statistics ... BUT I know that we are still only at about half the volume of Deeds Office lodgements compared to the height of the property cycle in 2008.  While volumes remain low, I don't believe that sufficient interest in property exists to drive a meaningful and enduring growth in Property Prices.  (If there is such a thing as enduring in a cyclical market?)

Gareth Shepperson
Commercial and Property Attorney

Surprise acceleration of house prices

The average house price for May rose 8.1 percent year-on-year, First National Bank (FNB) said yesterday.

This was slightly higher than a revised 7.9 percent for April, the bank's household and property sector strategist, John Loos, said in a statement.

'The solid performance of the housing market in recent times appears to go somewhat against economic fundamentals which are currently very weak.'

Real house price growth, which was when house prices were adjusted for consumer price inflation, came in at 1.73 percent year-on-year in April. May's consumer price index was not yet available, he said.

This represented a slight slowing from a revised 1.9 percent real price growth in March.

This was due in part to the pace of consumer price index inflation having quickened from 6 percent in March to 6.1 percent in April, he said.

'While the 8.1 percent May house price growth rate was slightly up from the prior month's 7.9 percent, we don't read too much into such a mild acceleration,' said Loos.

'The broader picture in house price growth appears to be one of settling around the 8 percent mark in recent months.'

He said during May some key frequency economic indicators continued to suggest a possible slowdown in the rate of increase in house prices in the not too distant future.



Denny Crane

Denny Crane
It's not me ... yet. Denny Crane from the TV series Boston Legal. Click on picture if you're not sure who he is!