Year-on-year house price growth continued to accelerate mildly to 4.6% in November


In November 2017, the FNB House Price Index showed a further mild acceleration in year on year growth, from a revised 4.4% in October, to 4.6%.

Examining the year-to-date average, though, it appears most probable that, despite the recent monthly year on year acceleration, average house price growth for 2017 as a whole will be not far above 3%, down from an average 4.7% in 2016, and the third consecutive year of average house price growth slowdown.

In real terms, when adjusting for CPI (Consumer Price Index) inflation, the house price correction gradually continued as at October, with the real rate of house price change remaining in mildly negative territory to the tune of a -0.4% year on year decline (November CPI data not yet available). This is a diminished real house price deflation rate, however, from -0.9% year on year in September and from a low of -4.8% reached in December 2016.

This diminished real price decline in October was due in part to the acceleration in the year on year house price inflation rate of that month from 4.1% in September to 4.4%. However, a decline in CPI inflation from 5.1% year on year in September to 4.8% in October also assisted in curbing real house price decline.

The average price of homes transacted in September was R1 103 092.

Although year on year house price growth has been accelerating mildly in recent months, viewing the bigger annual picture it remains most probable that 2017 as a whole will turn out to be a slower average house price growth year than 2016, and will represent the third consecutive year of house price growth slowdown.

With 11 months’ worth of house price data already available, the annual average year to date house price growth for 2017 sits at 3.3%, down from 4.7% in 2016, and a multi-year high of 7% reached in 2014.

Our Firstrand expectation at the beginning of 2017 had been for 3% average house price growth this year.

Examining the longer term real house price trends (house prices adjusted for CPI inflation), we see that the level as at October 2017 had lost -4.9% since a post-2008/9 recession high in December 2015.

Looking a bit further back to the all-time real house price peak at the end of 2007 (at the end of the pre-2008 housing boom period), on a cumulative basis real house prices were -19.9% down on that high as at October 2017.

However, looking back further, despite a mediocre performance in recent years, the average real price currently remains a massive 62.5% above the end-2000 level, almost 17 years ago, and a time back just before boom-time price inflation started to accelerate rapidly.

In nominal terms, when not adjusting for CPI inflation, the average house price in November 2017 was 318.26% above the end-2000 level. By comparison, consumer goods and services prices, as measured by the CPI, were only 156.69% higher over virtually the same period (up to October 2017 due to November CPI data not yet available).

John Loos is the household and property sector strategist at FNB Home Loans.