News & Advice Trending

In order to answer the question as to whether recent house price growth rates are sustainable, one should probably ask the question as to how sustainable this recent strong growth in disposable income is? We think it is not sustainable at recent levels. After a sharp recovery off a low base in income from investments, one would think that this source of income would do as wage income already appears to be doing, i.e. shift lower to get more into line with the pace of general economic growth.

This, in turn, would mean that, even should real economic growth remain at recent annualized levels of around 3%, we would expect disposable income in real terms (nominal disposable income growth adjusted for consumer inflation), to slow from recent strong levels of 5% year-on-year, to closer to 3%.

On top of this, recent weeks have seen increasing concerns regarding global economic growth. US real GDP (Gross Domestic Product) growth slowed from an annualized rate of 3% in the previous quarter to 2.2% in the 1st quarter of 2012, while recession talk in Europe has stepped up a gear of late.

And indeed, examining month-on-month seasonally-adjusted house price growth, it may well be that the growth momentum is starting to subside a little (although one must bear in mind that month-on-month growth can be a little volatile), although this obviously will only seen in year-on-year growth figures with something of a lag.

From a February peak of 1,42% month-on-month, the FNB House Price seasonally-adjusted growth rate has slowed for 2 consecutive months to 1.17% in April.

The recent month-on-month growth surge in the FNB House Price Index, which has taken place over the summer months starting in November 2011, was the 3rd “mini-surge in house prices since the 2008/9 recession dip, and it once again came in tandem with a minor improvement in the economy. This is reflected in the SARB Leading Indicator, which on a month-on-month basis also recently showed its 3rd “uptick” since the recession.

At present, therefore, the residential market’s periodic minor price surges move in a very similar direction to the short term economic fluctuations, with little if anything in the way of “speculative” behavior to drive it in the opposite direction.

Given the current fragility in the world economy, and evidence pointing to global economic growth slowing once again., it appears to early to expect a sustained move to higher house price growth in South Africa.

John Loos

Household and Property Sector Strategist

Leave a Reply

Repo Rate Cut: Encouraging News For Home Buyers
Is Now The Right Time To Upgrade To a Bigger, Better Home?
Why Creditworthiness Is Just As Important For Tenants
Is Investing In Property During The Recession Still A Good Idea?
28 Important Questions To Ask When Buying Property
Is Hosting Your Property On Airbnb Legal?
5 Easy Ways to Sell Your Home FAST!
Divorcing And Need To Sell? 3 Possible Options
Unrealistic Expectations Can Sour Relations With Agents
Poor Economy Affecting South Africa’s Property Market
Does The Property Market Still Need Estate Agents?
New Landlords Need Experienced Agents
Make Your Bond Work For You
The Perils of Rising Consumer Debt For Landlords
The Gap Between Asking and Selling Price Widens
First-Time Home Buyer? How To Avoid Tax And Get Up To 44% More Space
Is Now The Right Time To Upgrade To a Bigger, Better Home?
Is Investing In Property During The Recession Still A Good Idea?
28 Important Questions To Ask When Buying Property
3 Most Annoying Things About Buying A Home (And How To Avoid Them!)
House Hunting: How To Get Over The One That Got Away
Factors To Consider When Letting Out Property
7 Deadly Sins to Avoid When Investing in Property
4 Hot Tips For Investing In Student Accommodation
Is Property an Asset or Expense?
Property Buyers Value Lifestyle Over Value-Growth Prospects
How Older Buyers Show The Power Of Home Equity
How To Make Your Offer To Purchase More Attractive To Sellers
How To Find Your Diamond In The Dust?
Essential Questions For Home Buyers To Ask Their Real Estate Agent
Top Tips For Selling Your Home in Winter
5 Easy Ways to Sell Your Home FAST!
Unrealistic Expectations Can Sour Relations With Agents
Cut Your Price and Get The Jump on Other Homesellers
Unrealistic Seller Expectations Contribute To Declining Sales
Key Aspects And Features That Sell Homes
Lightstone predicts a buyer’s market for 2017
House Won’t Sell? Here’s What You’re Doing Wrong!
Factors that determine property value
Create Home Buyer Appeal Through Home Staging
Is There A Difference Between Offers?
How To Decide When To Sell
Does My Agent Care About Me Or Just The Commission?
3 Questions To Ask Before Listing Your Home
I Just Bought A Home – Now I’m Unexpectedly Being Transferred
Why Creditworthiness Is Just As Important For Tenants
Factors To Consider When Letting Out Property
New Landlords Need Experienced Agents
The Perils of Rising Consumer Debt For Landlords
First-Time Tenant? What You Need To Know
Average residential rental values on the increase
Is It Possible To Terminate A Lease Agreement Without Recourse?
New Generation Digs Now On The Rise
When Is Your Rent Due?
Gauteng Property Rental Market Forecasts Growth
Keeping Track of Parking On Common Property
How And When To Legally Evict Tenants
The Rental Housing Amendment Act: Waiting For Light In The Dark?
Tenants: Be Aware Of Ongoing Credit Checks
How To Rent With Pets
Divorcing And Need To Sell? 3 Possible Options
5 Mistakes To Avoid When Relocating
7 Tips For Packing And Moving Quickly
Moving? Things To Think About!
Maximising Small Spaces
7 Tips To Help Your Children To Adapt To The Move
What To Do With Your Home When You Have To Relocate
Moving With Pets Can Be Tricky
Estate Agent Moving Tips
Telltale Signs You Need A New Home
Seven Signs You Need A New Nest
Über Wealthy On The Increase And On The Move
First-Time Home Buyer? How To Avoid Tax And Get Up To 44% More Space
Repo Rate Cut: Encouraging News For Home Buyers
Is Investing In Property During The Recession Still A Good Idea?
4 Hot Tips For Investing In Student Accommodation
Make Your Bond Work For You
Energy-Saving Tips For Your Home This Winter
Costs To Consider When Investing In Property
Smaller Properties Yield Great Investments
8 Myths Preventing People From Real Estate Investing
Own Fixed Property? You Need a Will!
Tax Tips for Landlords – What You Need To Know
The Perfect Investment Property
St Francis Bay’s housing market attracting top dollar
Factors that determine property value
Average residential rental values on the increase
Is Hosting Your Property On Airbnb Legal?
How To Protect Your Commercial Property Investment
Commercial property still important asset class for private buyers
Know The Risks Before Building Airbnb Castles In The Sky
Green Buildings Catching On In South Africa
Digital Disruption And The South African Commercial Real Estate Market
Can You Run A Business From A Sectional Title Home?
What’s Driving Change In The Commercial Property Sector?
5 Ways Commercial Property Space Planning Can Save You Money
Investing In Commercial Property an Attractive Option
3 Obvious Signs That It’s Time For Office Relocation
3 Things You Need To Know Before Buying Vacant Land
Price Correction In Commercial Property Market
South Africa: Evolution of Industrial Properties
The Commercial Times Are Changing