Signs of slowing in residential property market

Cape Town - Early indications point to a renewed near-term slowing, not only in the South African economy, but in the residential property market, John Loos, household and property sector strategist at FNB, said on Friday.

House price growth has slowed for three months in a row and data shows there has also been a one month slowing in the demand rating. Month-on-month demand growth started to slow in August, which, according to Loos, possibly means a near-term weakening coming in the FNB Valuers’ Residential Market Strength Index (MSI).

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The MSI is, however, still above 50 on a scale from 0 to 100, which to him implies that the valuers, on aggregate, think national residential demand is mildly stronger than supply. The lowest point the MSI reached in 2016 was 50.68 in April, while it was 50.94 in August.

"While one month of slowing growth in the demand rating makes it too early to draw conclusions about a trend change, the month-on-month house price inflation rate has slowed for three consecutive months to August," said Loos.

In July real house price growth - after house price inflation is adjusted for consumer price inflation - was 0.9%.

The August FNB House Price Index shows a temporary acceleration in month-on-month average house price growth going into the second quarter of 2016.

"Admittedly, much of the short second quarter bout of residential market strengthening was probably largely driven by the Western Cape region, which has moved in a different direction compared to most of the country of late," said Loos.

ALSO READ: Cape properties shine amid national slump

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