House prices down 15% – FNB

2011-07-04 08:12

Average house prices are 15% lower than they were three years ago, according to the FNB House Price Index released today.

House prices reached a high point in February 2008, FNB property market analyst Ewald Kellerman said.

At that time they measured 195 on the index, but in May house prices had an index value of 165.

“Therefore, the average house price in real terms is currently more than 15% below the highest point reached three years ago,” Kellerman said.

The average house price for residential property recorded in June was R805 759.

The June FNB House Price Index showed slight acceleration to 2.6% year-on-year growth from a revised 1.8% in May.

When taking the effects of inflation into account, real house prices had declined at a rate of -2.5% a year in May as consumer price inflation at 4.6% was still much higher than property price growth.

“The slight acceleration in the most recent month is believed to be an effect of the last interest rate reduction in November last year.

“This growth rate is not expected to be sustained in the coming months as these effects wear thin,” Kellerman said.

He said the last interest rate cut was announced in November, more than seven months ago, and the effects of this were wearing thin as households became used to a lower interest rate environment.

“Unfortunately, current low interest rates alone are not enough to sustain positive house price growth.”

He expected interest rate hikes to start again towards the end of the year.

“Interest rate expectations on the back of rising inflation, coupled with a weak market in terms of demand and supply balance increases the likelihood of another round of nominal house price decline early next year,” Kellerman said.

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