House prices nudge up slightly

The First National Bank house price index showed a mild acceleration in its year-on-year average price, from a revised 6.2% in May to 6.6% in June, the financial services group said yesterday.

"The renewed acceleration in house price growth, which resumed early in 2013 after a lull late in 2012, continued in the June version of the FNB house price index," the group said.

There was a "very slight" year-on-year increase of 0.61% in real terms, adjusted for consumer price inflation in May. Consumer price inflation of 5.6% year-on-year in that month was slightly lower than house price inflation.

The index's average price of home sales was R891266.

In real terms, the index was 18.6% down on last decade's real price peak reached in November 2007.

In nominal terms, prices were 15.7% higher.

"However, compared to June 2003, 10 years ago, the index is up 44.8% in real terms and 148.8% in nominal terms," the group said.

"[This suggests] ... that the price effects of last decade's residential demand boom have far from worn off, despite a significant downward real correction since late 2007."

The group said that, despite the recent improvement, the housing outlook could still remain mediocre, with the economy under "significant pressure".

It said the key release last month was the SA Reserve Bank's Quarterly Bulletin, which confirmed that real household disposable income growth had slowed further in the first quarter from the prior quarter's 2.4% quarter-on-quarter annualised rate to 2.2%.

"This has a bearing on residential buyer purchasing power growth, and largely explains the recent steady deterioration in consumer confidence in recent quarters," it said.

"The current level of interest rates set by the Reserve Bank is at multi-decade lows, and indeed the stability of interest rates at these low levels has helped to gradually strengthen residential demand through 2012 and early 2013."

The group said it was, however, "questionable" whether this strengthening of residential demand could continue at a time of "clear economic weakness".

"For 2013 as a whole, therefore, a weak economy and resultant weakened disposable income growth leads to the ongoing expectation that house price growth will continue to remain largely in single-digit territory in the near term," FNB said.

This, it said, was due to potential pressure on demand, not far outpacing consumer price inflation of near to 6%.