FNB House Price Index – Slower year-on-year house price growth in February 2013

The FNB House Price Index for February 2013 showed further slowing in its year-on-year inflation rate, from a revised 3.9% in January to 2.6%. This continues a mild slowing growth trend from a “mini-peak” of 7.7% growth reached in July and August 2012.

The average value of homes transacted in the FNB House Price Index was R846,172 in February.

This slowing year-on-year house price growth, to levels back below consumer price inflation, implies a recent return to declining house prices in inflation-adjusted real terms. As at January (February consumer price inflation data not yet available), the combination of a CPI inflation rate of 5.4% year-on-year, and a 3.9% nominal house price growth rate in that month, translated into a real year-on-year decline of -1.35% in the FNB House Price Index.

Monitoring longer term performance of the index, we see that in real terms, as at January the FNB House Price Index was still 58.7% higher than in July 2000 when the index started. However, since the revised real price peak reached in November 2007, real price levels have declined by -19.5%. In nominal terms, the index is 216.9% higher than July 2000, but only 9.5% above November 2007.


What movements in house price growth suggest over the past year to year-and-a-half is that the best rate of improvement was to be found back in the 1st half of 2012, around the time when the economy was going through a relatively strong growth period. The slowing growth more recently perhaps reflects the slower economic growth period of the 2nd half of the year.

The FNB Valuers’ Market Strength Index (Explanatory notes on page 4) has also pointed to year-on-year improvement over the course of 2012, and like price growth it also pointed to an accelerating rate of improvement earlier in 2012, and a slowing pace of improvement in the 2nd half of 2012.

Trend changes in the Market Strength Index often lag price growth trend changes a little, but this indicator nevertheless serves as something of a “confirming indicator” for recent price trends.

In addition, despite some rise in the Market Strength Index through 2012, the fact that it remains below the crucial level of 50 implies that the valuers still rate supply as better than demand. This should probably imply further broad house price decline in real terms for the foreseeable future, and this is what the FNB House Price Index is recording once again.


Where to from here? It was a relatively strong economic period through the summer of 2011/12 to mid-2012 that aided a noticeable improvement in the housing market and house price growth. During the 2nd half of 2012, however, a slower domestic economy, hampered by widespread industrial action disruptions to production (the most extreme being in the mining sector), was arguably instrumental in causing a slower pace of price growth in the 2nd half of 2012 and early-2013.

However, .. [read more]

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