The FNB House Price Index growth slowed to 1.1% year-on-year in July, down from 1.6% in June in line with falling buying activity, with mortgage volumes now tracking closer to pre-pandemic levels and more sellers having to lower their asking prices.
The average bond amount, estimated from deeds data, has declined by about 3% this year, marking the first decline in 14 years, the bank and financial services group’s senior economist Siphamandla Mkhwanazi said yesterday in the FNB Property Barometer.
While the trend for house prices is downward at present, the building of homes in terms of units has been on an upward trend since 2010, when compared with non-residential buildings, and alterations and additions.
Pam Golding Properties CEO Andrew Golding said on Tuesday that in terms of units, the residential building sector has outperformed – even though the total number of residential plans passed in 2022 rose by just 3.9% compared to 2010 levels.
In contrast, non-residential plans passed fell by 19.7% in the same period, while the number of alterations and additions slumped by nearly a third (31.5%).
Residential building plans passed now account for 58% of the total number of plans passed nationally, compared with 48% in 2010, Golding said.
Year-to-date tax data reveals that property transfer duties are down 10.3% compared to the same period last year.
Mkhwanazi said: “In addition to lower demand, these indicators signify a downscaling trend by buyers, along with tightening of lending standards amid higher borrowing costs and affordability constraints.”
Feedback from estate agents surveyed by FNB also indicated a widening gap between income levels and current house prices.
About 45% of estate agents surveyed said income levels had considerably lagged house prices, while only 24% believe income had managed to keep pace.
“Consequently, a larger proportion of sellers needed to recalibrate their expectations and reduce their asking prices. Although the average discount on asking prices remains consistent, around 10%, our survey suggests 81% of sellers in the second quarter were compelled to lower their asking prices, reflecting an increase from 75% in the previous quarter,” Mkhwanazi said.
“Collectively, these indications suggest a subdued environment for house price growth. However, variations are evident across regions, with data showing relatively stronger performance in the Eastern and Western Cape regions,” he said.
Golding said just more than 80% of the value of residential building plans passed last year were in the Western Cape, Gauteng and KwaZulu-Natal.
While only accounting for 6% of the total value of building plans passed, the Eastern Cape saw significant growth in value of 218.7% during the past 12 years – one of only three regions registering growth of over 200% during this period.
The Free State registered the lowest increase (12.5%) in the value of residential building plans passed last year relative to 2010, Golding said.
Mkhwanazi said central banks around the world were signalling an end to interest rate hikes as global inflation continues to decelerate
“On a domestic front, our assessment indicates that interest rates have reached their peak, and we anticipate the emergence of a measured cutting cycle in the latter half of 2024.”
Nevertheless, there was upside risk bias over the short term because of the possibility of another rate hike by the US’s Federal Reserve, or if inflation surprises to the upside, he said.
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