2018 show far stronger deflation
With the first two months of 2018 now history amidst major political changes, what has the impact on the property market been to date Overall the activity levels have varied depending on the price brackets with the lower end of the market regarded as active and the top end of the market as subdued.
The February 2018 FNB House Price Index grew at a far slower year-on-year of 2,3%, down from a revised 3,8% in January and the high reached in November 2017 of 5%. FNB explain this weak February growth to the weak sentiment and market conditions late in 2017, which still seem to be feeding through to prices with a lag.
The turn-around in sentiment during the first two months of the year can therefore be expected to positively influence price growth over the next three months. In real inflation adjusted terms the FNB House Price growth was -0,6% in January after adjusting for a 4,4% CPI Inflation rate.
What is interesting is that the month-on-month figures for the first two months of 2018 show far stronger deflation or negative price growth (-0,79% in February). These figures represent the actual activity on the ground where estate agents are engaging with buyers and sellers on a daily basis and understand that the buyers still have the upper hand and are securing properties at discounted prices.
The FNB Residential Market Activity Indicator is compiled from the FNB Estate Agent Survey and indicates a low of 5,29 reached at the end of 2017 down from a high of 6,78 reached in 2014.
This represents the lowest rating since the second quarter of 2009. It is therefore understandable when the last 6 months of property market conditions have been compared to the recessionary market conditions experienced in 2009.
A good indicator of the property market cycle is the average number of weeks and days a property is on the market before it sells. By the final quarter of 2017 this figure was 17 weeks and 2 days.
This is a significant move away from the 12 weeks recorded in 2016 and representing an equilibrium between demand and supply to a market characterized by an over-supply.
Despite the figures showing poor property market performance for the first two months of this year as a result of a lag effect of the negative sentiment and lower demand experienced in the last quarter of 2017, FNB predict house price growth of 4,8% on average for 2018 in comparison to the 3,8% average achieved for 2017.
They base their view on the increased business confidence following the change of leadership of the ruling political party and the appointment of business-popular Ministers to key cabinet posts such as Nhlanhla Nene (Finance) and Pravin Gordhan (Public Enterprises).
The Rand exchange rate continues to perform well recorded at 11,84 to the US Dollar on 5th March 2018, which is in contrast to the high recorded in January 2016 of 16,84. With CPI Inflation at a low of 4,4% and the prospect for improved GDP growth to 1,5% for 2018, it seems that we are poised for a better 2018.
|Core Version: 5.02.23|