Oct HPI slows to 6.8%, as mortgages slow

SBR’s HPI slowed to 6.8% y/y in October from a slightly upwardly revised 6.9% y/y in September (fig 1). Sub-indices show that:

· Freehold properties accelerated to 8.9% y/y from an upwardly revised 8.3% y/y (originally 8.1% y/y) in September.
· Sectional title properties slowed to 8.1% y/y from 8.9% y/y in September (fig 1).

The weighted median price per square metre rose 4% m/m to R4, 403, from R4, 234 in September (fig 3). 2016 YTD house prices per m2 have under performed by between 8% and 22% compared with the previous four years (Fig 7).

The median price of a freestanding house applied for and approved by Standard Bank was R950, 000 in October, down from R970, 000 in September 2016. The median price of a flat/townhouse was R800, 000, down from R810, 000 in September. The weighted median price of the two was R904, 184, down from R906, 084 in September (fig 2).

Growth in house prices has been moderating for the past four months on tougher economic conditions and rising political uncertainty. MMI/BMR’s Consumer Financial Vulnerability Index (CFVI) shows that since Q4:15 debt servicing capabilities has been more of a concern to consumers than their income levels, their ability to save or their ability to consume (fig 8).

And, according to the NCR, 40% of credit active consumers had impaired records in Q2:16, up from 35% in Q2:15.
Household credit growth slowed to 1.2% y/y in September from 1.4% y/y in August (fig 5) but, if we adjust the data for African Bank, growth slowed to 2.6% y/y from 2.8% y/y. Within household credit, mortgage advances (60% of total) slowed to 3.7% y/y from 3.9% y/y.

Encouragingly, SBR’s Financial Conditions Index showed a mild improvement in August (See Standard Bank’s FCI improved in August, published on 11 October 2016), although it still indicated restrictive financial conditions (fig 4).

Similarly, the BER/EY’s Financial Services Index shows that in Q3:16 retail banks were still applying tight lending criteria when approving loans to households, although this had eased somewhat from Q4:15 (fig 6).

Looking ahead, we expect consumers to remain under pressure into 2017, with household expenditure only recovering in Q3:17 once the SARB starts cutting interest rates. Standard Bank expects property prices to remain under pressure for the remainder of 2016 and into 2017.

Read more here: Standard Bank October HPI