Property Talk

The good news house prices are on a steady increase

A quote I came across recently was, “The best time to buy a home is always five years ago.” This made me think of the price performance of the residential property we transact in on a daily basis and how things have changed over the past sixteen years.

The recently published FNB House Price Index gives us insight into price changes since January 2001. From the data set it is amazing to reflect on the growth rates between October 2004 and May 2005 when year-on-year growth rates did not drop below 30%, with a high of 34,9% reached in January and February 2005.

It was only by October 2005 that price growth started to drop into the mid teens and then by April 2007 it dipped below 10% for the first time since February 2003. Between May 2007 and March 2008 prices were still growing in double digits but from April 2008 it was as if the market had fallen off a very steep cliff face and prices plummeted like few of us had experienced during our professional lives.

Between September 2008 and September 2009 no positive growth rates were recorded, with February 2008 recording a scary -7,8% decline alone measured on a year-on-year basis. Since October 2009 we have experienced relatively unimpressive single digit growth figures, with May 2010 peaking at 8,2%, which was only surpassed again in December 2013.

The 2014 and 2015 years displayed solid growth and then 2016 showed definite signs of weakness as price growth declined steadily from 7% in January 2016 to 1,8% by December 2016. The good news is that the price growth as been on a slow but steady increase since the 1,7% in January 2017 to the 4% recorded in August 2017.

In real terms however, adjusted for CPI inflation, house price growth remains firmly in negative territory. The July 2017 figure shows a -1% year-on-year decline. The low point in real price deflation was recorded in December 2016 with house price deflation measuring -4,8%. What goes down invariably goes back up and the current trend line is emphatically upwards.

If we examine real house prices over a ten year period we see that prices are current -19.2 % lower today than at the end of 2007. This clear sideways movement in house prices over the past ten years means one thing – a market favouring buyers and providing opportunities to cash rich investors to be able to buy quality properties are very competitive prices.

An interesting comparative to the FNB House Price Index is the Standard Bank House Price Index and is currently showing a lower growth rate of 2.3% and Mortgage Originator Ooba showing their measurements of House Price Inflation as being 2,2% for the average house price within their portfolio and the average first time buyer purchaser price recorded at a slightly faster 4% growth rate.

The FNB Macroeconomic forecast for nominal house price growth over the next two years is currently 4,7% in 2018 and 5,2% in 2019. The consensus for 2017 is that House Price Growth will average 3%.