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Slow growth predicted for property market

Slow growth predicted for property market

House price growth in South Africa was slow in January but is expected to improve, particularly towards the second half of the year.

Jon Loos, Household and Property Sector Strategist for FNB, predicts that low growth of 2-3% can be expected in the property market through 2017.

The year has started poorly for property, with FNB’s House Price Index for January showing that house price growth has slowed for a 9th consecutive month, from a high of 6.9% in April last year to a miniscule 0.3% in January this year. The average house transaction price in January 2017 was R1,049,038.

Consumers lack confidence

This decline has been apparent for some time, with the estimated time to sell a home rising from 11 weeks and 1 day at the start of 2016 to 15 weeks in the final quarter. This slowdown is a result of slowing residential demand as low consumer confidence and an ailing economy take their toll on consumers.

“The ongoing slowdown in year-on-year house price growth to near zero is very much reflective of ongoing weakness in the Household Sector’s confidence levels, as also seen in the weak FNB Consumer Confidence Index”, says Loos.

The poor consumer confidence is reflective of slow disposable income growth in a virtually zero-economic growth environment, following a multiyear growth slowdown. The disposable income of South Africans has taken a battering with high food prices exacerbated by the drought, increases in effective tax rates and rising interest rates all contributing to high inflation rates.

All the of the above have contributed to residential demand slowing over the last few years to the extent that the market is now largely becoming a buyer’s market – a situation where supply exceeds demand and price growth is slow.

It’s not all bad news

The economy is expected to show some recovery in 2017, with SARB’s Leading Business Cycle Indicator continuing its upward momentum and turning to positive year-on-year growth recently. If the economy does grow in 2017 as expected, we can expect to see some strengthening in house price growth in the second half of the year.

That would be driven more by positive growth in the 2nd half of the year, based on the expectation of economic growth picking up, interest rates continuing to move sideways at current levels, and price growth later in the year coming off the low base set in recent months With growth forecast at around 1.1%, the house price growth will be pretty moderate – most likely between 2-3% for the whole of 2017.


Article from privateproperty