After three years of slowing annual average house price growth, FNB forecasts that 2018 could see a slightly stronger growth rate, but also cautions against expecting too much.
“From an average house price growth rate of 3.7% last year, we project the 2018 average to shift a little higher to nearer to 5%,” said John Loos, household and property sector strategist at FNB.
“This is not a major improvement, but it stems from expectations of marginal economic growth improvement in 2018, from an estimated 0.7% last year to 1.2%, and one lone interest rate hike only late in 2018 not expected to have a significant dampening effect.”
Loos said that much will depend on the political and government policy environment, with 2018 being the run-up to the 2019 general election.
“Uncertainty around policy direction makes forecasting even tougher than it would be under conditions of greater certainty, posing significant risks to forecasts. Widely publicized ratings agency downgrades for the country, should they occur, can quite easily dampen national sentiment, and this can easily feed into a housing market either directly, or indirectly via the economic impact.
“In addition, drought conditions, notably in the Western Cape region, can impact on regional economies which feeds into those regions’ housing markets, so much will depend on weather patterns in certain parts of the country this year, especially in the Western Cape which is one of the country’s prime property markets, the property expert said.
A Reuters poll on Thursday showed that South Africa’s Reserve Bank is expected to leave interest rates unchanged at its January 18 meeting.
Despite strong rand moves against the dollar, most notably towards the end of December, 17 of the 20 economists polled by Reuters believe that the bank will leave the rate at 6.75%. The other three expected a 25 basis points cut.
“We now think that the (bank) will wait until after the February national budget in order to assess whether the Treasury has done enough to appease Moody’s,” said Jeffrey Schultz, economist at BNP Paribas.
FNB said that 2017 saw its House Price Index growing by 3.7%, a slowing on 2016, and the third consecutive year of slowing annual average price growth. “We had expected a slower house price growth rate in 2017, with the country’s economic growth performance having stagnated for some years.
“However, monthly house price growth has been accelerating recently, pointing to a stronger start to 2018, with leading economic indicators suggesting that house price growth could receive slightly more support from the economy this year, compared to 2017,” said Loos.
The average price of homes transacted in December was R1,126,224.