Whatshot
Property Talk
Property Talk
Date: 2016-12-09
Tracking and paying attention to how prices are moving and in particular the speed at which they are changing - either up or down, can become an extraordinarily powerful way for us to predict the most likely outcomes in any given market.
The housing market is no different and it is insightful to analyze the house price performance recently to get a sense of exactly where we are in the property market cycle and what can be expected over the next three months.
According to FNB this represents the 7th consecutive month of slowing year-on-year price growth. Even more noticeable is that the pace of slowdown in growth has been more rapid than any other slowing growth phase of the five years. It was not so long ago in April of this year that year-on-year price growth was still a respectable 6,9%.
The warning signs of an impending slowing in the housing market have been evident for the past year evident through the FNB Valuers Demand Rating which indicating a slowing of demand as the valuers of residential properties for mortgage bond applications were seeing things, as well as activity in the market reported by estate agents in the quarterly FNB Estate Agent Survey.
First time buyer activity dropped off dramatically over the past 12 to 18 months indicating a tightening in this key sector which acts as a barometer for the overall market.
When we take CPI inflation into account and adjust nominal price growth to real prices we note that the October 2016 average real rate of decline in year-on-year prices was -3,5%. With CPI inflation reported by StatsSA as being 6,4%, real prices for November are expected to show a further decline.
The last four months of house price growth calculated on a month-on-month basis have been sharply down. The housing market is moving in tandem with our general economic activity and the Manufacturing Sector Purchasing Manager's Index (PMI) is one of the country's key leading economic indicators.
It is used globally as an excellent predictor of general GDP growth in any market economy. Our PMI measure has dipped below the important 50 threshold in recent months indicating pressure on the manufacturing industry. Economic growth for 2016 is expected to end at zero and predicted to be 1% for 2017. For the housing market it will remain a buyers market.
This is great news if you are currently shopping around for a home as there is every indication that you can expect to be able to negotiate a very good outcome.
For further information and an interactive analysis of this article follow my blog: andreaswassenaar.blogspot.com.