After weak house price growth in the first half of 2019, there are signs that the prices may be stabilising, FNB has said, in a new analysis of the residential property market.
A number of factors are supporting prices:
Demand is improving
Improvements in demand can be attributed to some easing in buyer despondency following the elections, the increased bargain hunting given the attractive pricing, more competition between lenders as well as lower interest rates, says FNB.
This is reflected in the steady growth in mortgage extension, which has averaged 4.3% in the year to date, compared to 3.4% in the same period last year.
In fact, for the first time since June 2011, mortgage advances have been growing faster than the average house price growth in South Africa since the beginning of the year.
"Except for the brief period in the beginning of 2018 ('Ramaphoria'), we have not seen mortgage lending outpacing house prices since June 2011," FNB said in a release.
This has contributed to a 0.9% increase in transaction volumes this year, compared to 2018.
Supply is slowing
The FNB Market Strength indices show a "persistently slowing pace" in properties put on the market.
"The slowing pace of supply is driven by sellers withdrawing their properties, amid tough selling conditions, as it is becoming increasingly difficult to attain asking prices. This is countered somewhat by the surge in the supply of new stock (particularly flats and townhouses), as well as the rising emigration-related sales," FNB says.
Fewer properties in the market, combined with stronger demand, should push prices higher.
FNB expects that the SA Reserve Bank will cut rates by another 25 basis points before the end of the year, which should lend support.
FNB expects that house prices will increase by 3.5% this year, and by 4% next year.
The eThekwini metro continues to overperform, supported by new developments in the North Coast regions, as well as renewed interest in the city centre, says FNB. In the inland regions, Ekurhuleni appears to have bucked the generally slowing price trend at a national level, while Johannesburg and Tshwane remain in the low single-digit territory.
However, Tshwane properties remain in the market for the shortest periods before they are sold: