SA real house prices are in decline - and it now takes more than four months to sell a property
- South African residential property prices are dropping when adjusted for inflation, a new FNB report shows.
- It now takes on average 16 weeks and four days for a residential property to be sold.
- The report indicates that there is possibly an oversupply of residential properties in the country.
Residential property prices in South Africa are dropping when it is corrected for inflation, the FNB Property Barometer for July shows.
The report shows that while year-on-year residential properties grew by 4.1%, real property prices are decreasing.
“While the growth accelerates mildly in nominal terms, price growth remains negative in ‘real’ terms, when adjusting for consumer price index (CPI) inflation,” John Loos, household and property sector strategist at FNB, said.
As of June 2018, CPI stood at 4.6%.
Property prices have been experiencing a decline since 2016, and started showing signs of a slow-down in 2014 where it peaked at 2.4% growth, Loos says.
“[This was caused by] a broad growth slow-down [which] commenced on the back of interest rate hiking at the time, along with a broad economic growth stagnation from around 2012,” Loos said.
According to FNB’s estate agent survey, the average time it takes for a residential property to be sold increased from 14 weeks and a day at the beginning of the year, to 16 weeks and four days in the second quarter.
This means there could be a slight oversupply of residential properties in the market.
Loos said the country’s forecast economic growth rates of between 1% and 1.5% will not be sufficient to create housing demand that could “mop-up” the oversupply in the market.
The slow economic growth makes it “increasingly likely” that year-on-year house price growth can be adjusted downward to 3.5% for 2018, compared to 2017’s 4.3%, Loos said.
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