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FNB House Price Index – March 2014 Still reflecting a solid, well-balanced residential market

FNB House Price Index – March 2014 Still reflecting a solid, well-balanced residential market. 1 April 2014. March 2014 FNB House Price Index Findings. Average house price for March 2014 was 8.6% year-on-year, unchanged from February’s 8.6%.

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FNB House Price Index – March 2014 Still reflecting a solid, well-balanced residential market

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  1. FNB House Price Index – March 2014Still reflecting a solid, well-balanced residential market 1 April 2014

  2. March 2014 FNB House Price Index Findings • Average house price for March 2014 was 8.6% year-on-year, unchanged from February’s 8.6%. • Real house price growth (i.e. when house prices are adjusted for CPI inflation), came in at 2.48% year-on-year in February. • The average price of homes transacted was R951,490. • In real terms, the FNB House Price Index is 26.1% above levels of a decade ago (February 22004) • However, compared with last decade’s real average price peak, reached in December 2007, the February 2013 real price was still -17.3% lower

  3. FNB Valuers point to further improvement in market strength in March • The FNB Valuers’ Market Strength Index (Explanatory notes on page 5) is now getting very near to the crucial level of 50. • This implies that the Index has nearly reached a level where the valuers’ aggregated demand rating draws equal in strength with the aggregated supply rating. • The Market Strength Index pointed to further improvement in the market demand-supply balance in March 2014, to reach a level of 49.52. • The increase in the Market Strength Index continued to be fuelled by the combination of growth in demand along with mounting supply constraints.

  4. Outlook • Residential market remains well-balanced • . • However, expectation remains for some mild slowing in house price growth later in 2014 (5-6% by year end), with economic fundamentals weak • SARB Leading Business Cycle Indicator for January showed further year-on-year decline to the tune of -2%. • Slow employment growth has slowed nominal disposable income growth late in 2013 • We expect prime interest rate to rise further to near 10% by end-2014

  5. Speculative activity expected to remain “limited” • The combination of 8.6% house price growth and a slightly higher 9% Prime Rate should continue to keep the market by-and-large healthy in terms of containing levels of speculative activity. • Our alternative measure of Real Prime Rate, using house prices with which to adjust prime rate instead of using CPI, remains slightly in positive territory to the tune of 0.4% in March. • While only slightly positive, this situation remains highly favourable compared with the 2004/5 period where a strongly negative real rate promoted speculative behavior on a large scale.

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