house prices slide more
01 October 2008

House price growth slowed to 1.8 percent y/y in September, following growth rates of a revised 2.9 percent y/y in August and 3.5 percent in July. On a month-on-month basis, price deflation has been a reality since early in the year and further –0.1 percent was recorded in September from 0.3 percent in August.  In real terms, adjusting the index for inflation using the CPI, y/y price deflation amounted to -9.5 percent during the month, but affordability is not yet improving for all, FNB said.

Looking ahead, FNB expects y/y price deflation to arise within the next month or two and continuing until early next year due to a sharp drop in demand, driven largely by declining real disposable income growth and rising debt servicing costs.  Nevertheless, FNB said, there are some encouraging signs emerging in the form of declines in petrol prices as a result of oil prices falling, and consumer price inflation is believed to be around peak levels, soon to decline.

"In addition, the household debt situation has begun to improve, with the debt-to-disposable income ratio declining in the second quarter. However, as yet these early signs of improving household 'fundamentals' are not believed to be sufficient to turn the market around," FNB said

The bank expects a turnaround in April next year when the first interest rate cut is expected to arrive.

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