Property Barometer – Mining Towns House Price Indices

FNB Mining Town House Price Index performances 

The FNB Mining Towns House Price Indices have “under performed” in recent years, 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 

South Africa’s Mining Sector appears to have “stabilized” somewhat, after a significant slowdown following on a commodity price slump that set in around 2011. Although commodity price levels remain a shadow of their former selves, some partial recovery has helped Mining Sector production growth back into positive territory.

In August, Mining Production rose year-on-year by 6.9%, while on a 6-month moving average basis (for smoothing purposes) the year-on-year growth for the six months to August was 4.4%, having come all the way from a negative -6.8% in the six months to June 2016. This represents a very significant improvement off a very low base.

FNB Mining Towns House Price Indices’ growth strengthens but still mediocre 

This recent return to some positive growth in Mining Production volumes may have been behind a mild 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 4.2% by the third quarter of 2017.

While strengthening mildly, however, this 4.2% remains in negative territory in real terms, given general inflation in South Africa (as measured by the CPI) being above 5%.

The FNB Gold Mining Towns House Price Index grew slightly faster at 4.9% in the third quarter, while the FNB Non-Gold Mining Towns House Price Index grew by a slightly lesser 3.5%.

Longer run performance and expectations 

Despite a recent uptick in Mining Town house price growth, FNB remains of the expectation that mining town housing markets will under perform the national average in the coming years, 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, despite its recent price growth being slightly better than Non-Gold Mining Towns.

Since the beginning of 2000, the size of the economy has grown cumulatively by around 63.2% (Gross Value Added at Basic Prices). By comparison Mining’s Gross Value Added in the 3rd quarter of 2017 was -0.4% down on the end-1999 levels.

Examining production volumes in the Mining Sector, we see overall production volumes in August 2017 mildly higher than the corresponding month of 1999, to the tune of 13.1%. Non-Gold Mining Production is up 47% over the period, while Gold Mining Production is down -65.6%.

Gold has thus been the “drag” on the Mining Sector, and one should thus probably expect to see the FNB Gold Mining Town House Price Index “under performing” over the longer term.

This is not to say that Gold Mining towns didn’t have housing market booms, due largely to the major interest rate reductions early-last decade from extreme high levels. Indeed they did have their booms.

But our FNB Gold Mining Towns Index did moderately underperform the National average since 2001. From the start of 2001 to the third quarter of 2017, it is evident that the FNB Mining Towns House Price Index rose cumulatively by 454.7% to slightly outperform the FNB National House Price Index’s (The FNB Long Term House Price Index version) 439.3%. However, the FNB Gold Mining Towns Index, while doing relatively well over this period under performed the national average mildly, rising cumulatively by 402.19.

However, isolating the period since the metals commodity price boom ended in 2011, Mining Town housing markets have under performed the national average more noticeably.

Whereas the FNB National Average House Price Index (Long Term version) showed 53.44% cumulative growth from the first quarter of 2011 to the third quarter of 2017, the FNB Mining Towns House Price Index rose by a lesser 30.74% and the Gold Mining Towns Index by a very similar 31.73%.


In short, the FNB Mining Towns House Price Indices point to some improvement of late, but over the longer run since 2011 they have under performed the National Housing Market, and FNB would expect them to continue to do so most of the time going forward, given that the Mining Sector (especially Gold Mining) is a stagnating part of the economy.

One may well ask why the Mining Town House Price Indices’ under performance relative to the National Average is not that severe? There are two probable reasons. Firstly, in towns with long term deteriorations in their economies, there is probably very little increase in housing supply, unlike the country’s major metro regions where building activity since early last decade has been strong. Secondly, in such long term economic stagnations, a portion of a town’s housing market can become so weak that it hardly ever gets traded, and thus has no or little impact on a house price index. In times of economic stagnation, therefore, a house price index is unlikely to reflect the full impact of housing market weakness, because some property can literally “exit” the market on a long term basis.

Read more here: FNB Property Barometer – Mining Town House Price Indices – October 2017