SA average house price growth dips in 2019
The average annual house price growth in 2019 was 3.6% year-on-year, according to the latest FNB House Price Index, released on Monday.
In 2018 the average growth was 3.8%.
The index takes into account residential property prices in South Africa.
"After a slow start to the year, the combination of a mild improvement in demand, progressive mortgage lending as well as attractive market pricing supported the residential property market in the second half of 2019," FNB said in a statement.
"Nevertheless, depressed labour markets continue to weigh on household finances, which poses a threat to sustained demand growth. Market strength indicators continue to show a narrowing demand-supply gap."
The index shows that pressure persists in more "affluent" areas, while low-income areas have remained resilient.
"Sellers in the upper end constantly had to reduce their asking prices to close the deal, while low-income areas are also supported by robust buy-to-let activity," according to the index report.
For the residential property market, FNB expects broader economic developments, especially employment growth, to continue dictating the longer-term trends.
"Positively, demand (for mortgages) has shown mild signs of improvement across all price segments. At the same time, some sellers withdrew their properties from the market amid unfavourable selling conditions. This has somewhat curtailed the pace of supply," states the index report.
"Nevertheless, there is still robust supply of new stock, as well as emigration-related sales."
On the other hand, demand from foreigners buying property in South Africa as well as from South African expats buying property locally remain comparatively subdued.
FNB forecasts average annual house price growth of 3.7% for 2020, which is still below its inflation forecast of 4.3% in the same period.
"House prices will be weighed on mainly by tepid disposable income growth, as well as low sentiment levels. Marginal support will come mainly from lower interest rates as well as the ongoing readjustment in supply of new build stock," states the index report.
Fin24 reported recently that, with annual house price growth of 3.8% over the 12 months from the third quarter of 2018 to the third quarter of 2019, South Africa ranks 24th out of 56 countries listed in the latest Knight Frank Prime Global House Price Index.
This is just above the average annual growth in house prices of the 56 countries in the index, which was 3.7% - the index's slowest rate of growth for over six years. According to the index report, this trend mirrors a pattern observed in Knight Frank's other global city indices – across both mainstream and prime segments.
* Compiled by Carin Smith