The FNB House Price Index for June 2016 rose by 7.4% year-on-year. This is slightly faster than the revised 7.2% rate recorded for May, extending the recent mild accelerating trend in average house price inflation to 5 months.
Examining house price inflation on a month-on-month basis suggests that a period of slightly better, or slightly “less weak”, economic performance during the 2nd quarter of 2016 may have in part fueled slightly stronger house price growth.
But the main driver of the accelerating national average house price inflation rate of late appears to be the Western Cape Province, with 2nd quarter year-on-year house price growth rate of 12.1%, while the other major provinces languish in single-digit price growth territory. Sentiment in and toward the Western Cape appears very positive at present, the region having created a perception of good economic management along with a good lifestyle, thus attracting significant interest from repeat home buyers from other provinces.
Looking forward, the country’s Leading Business Cycle Indicators (both OECD and SARB versions) both picked up renewed “downward speed” in year-on-year rates of decline going into the 2nd quarter, after slight improvement (slower rates of decline) earlier in 2016. This suggests that the 3rd quarter may be one of renewed economic deterioration after a slightly better 2nd quarter. FNB would thus not expect any sustained strengthening in national house price inflation, but how long the Western Cape’s price growth acceleration can continue remains the key “wildcard”.
Read more here: FNB Property Barometer_Jun_2016 House Price Index_4_Jul_2016
