Property Barometer – FNB Mining Town HPI performances

The FNB Mining Towns House Price Indices continued to “under perform” in recent times, but some improvement in Mining output growth recently may have been behind some mild Mining Town House Price Index growth acceleration.

Recent developments in the mining sector 

Many of these mining towns’ economies suffered at the hands of a global commodity price slump which started in 2011, and which contributed to mining output growth proving erratic ever since.

From a February 2011 peak, the IMF Dollarised Global Metals Commodity Price Index fell by a massive -59.4% up to the beginning of 2016.

Thereafter, off a very low base these prices showed a recovery of +44.9% to early-2017. More recently, however, there has been some renewed weakening in the Metals Commodity Price Index to the tune of -10.9% from February to May 2017.

As at May 2017, the Metals Commodity Price Index remained -47.6% below its February 2011 boom time peak.

However, any negative impact that the recent renewed price weakening may be set to have has not yet materialized, and the lagged impact of that metals price strengthening through 2016 appears to have helped mining production back into positive growth territory at least for the time being (having been in and out of negative territory since 2011).

In May, Mining Production rose year-on-year by 3.6%, while on a six-month moving average basis (for smoothing purposes) the year-on-year growth for the six months to May was 3.7%.

FNB mining towns House Price Indices’ growth strengthens slightly but still weak

A recent return to some positive growth in Mining Production volumes may have been behind a slight strengthening in the FNB Mining Towns House Price Index growth rate in year-on-year terms.

From a multi-year low of +1.7% year-on-year in the third quarter of 2016, the revised FNB Mining Towns House Price Index growth rate strengthened to 3% by the second quarter of 2017.

While strengthening mildly, however, this 3% remains in negative territory in real terms, given general inflation in South Africa (as measured by the CPI) being above 5%. The Gold Mining Towns House Price Index grew slightly faster at 3.2% in the 2nd quarter, while the Non-Gold Mining Towns House Price Index grew by a slightly lesser 2.6%, but the differences are not significant.

Longer run performance and expectations

In the longer run, FNB expects mining town housing markets to under perform the national average, given that Mining is a part of the economy which is very much in longer term stagnation. This is especially true in the case of Gold Mining.

Since early-2000, the size of the economy has grown cumulatively by around 61%. By comparison Mining production in 2017 to date is cumulatively up by a far lesser 1% on the year 2000 production average, with Non-Gold Mining being up by 28.2%, and Gold Mining down by -67.9%.

Much of the Mining Sector growth that actually took place from early last decade took place up until 2010/11 during the commodity price boom period, and took place in Non-Gold Mining Sectors. As a result, from the beginning of 2001 to the second quarter of 2017, it shows that the FNB Mining Towns House Price Index rose cumulatively by 445% to slightly outperform the FNB National House Price Index’s (The FNB Long Term House Price Index version) 437%. The FNB Gold Mining Towns Index, while doing relatively well over this period under performed the national average slightly, rising cumulatively by 396%.

However, isolating the period since the metals commodity price boom ended in 2011, Mining Town housing markets have fared less well.

Whereas the FNB National Average House Price Index showed 45.1% cumulative growth from the first quarter of 2011 to the second quarter of 2017, the FNB Mining Towns House Price Index rose by a lesser 29.55% and the Gold Mining Towns Index by an almost identical 29.65%


In short, the FNB Mining Towns House Price Indices point to under performances of late, as well as cumulatively since early-2011. There has been some recent mild strengthening in the FNB Mining Towns House Price Index growth rate, but at 3% year-on-year this remains firmly in negative real territory when adjusted for general inflation.

FNB would expect mining town housing markets to continue to under perform in the near term, given not only that mining, especially gold mining, is a longer term under performing sector, but also because it is questionable as to how far the recent mining output growth resurgence can go given that metals prices remain at moderate levels compared to pre-2011 boom period standards.

Read more here: FNB Property Barometer Mining Town House Price Indices