House price growth sliding

3-4%: MAY BE FOURTH SUCCESSIVE YEAR OF SLOWDOWN

House prices, on average, have been in decline in real terms since early 2016 – FNB.

FNB is the first major mortgage lender market to forecast negative house price growth, after inflation, over the next three years. In its second quarter Property Barometer, it forecasts house price growth to average between 3% and 4% for the period to 2020, implying a negative rate in real terms [after inflation].

FNB’s John Loos says if the expected weak growth and rising interest rate environment materialises in 2018, 2019 and 2020, it wouldn’t be enough “to significantly alter the housing market’s performance from the current low positive single digit house price growth environment”.

FirstRand’s annual GDP growth forecasts fluctuate “not far from 1.5% for the period up to 2020”, with interest rates also expected to begin “rising mildly” from 2019.

FNB points to the overall economy growth not “exceeding 1.5% yearon-year at any stage (1.3% average for 2017)”.

FNB says it’s “highly likely that 2018 … will turn out to be a slower average house price growth year than 2017”. This will be the fourth successive year of a slowdown in house price growth. In real terms, the average house price decline is at -1% year-to-date.

FNB says that over the next two/three years, the “housing market would thus remain somewhat off its equilibrium (… housing demand and supply are in balance), which is seen in the projected average time of homes on the market prior to sale moving in a 16-18 week range, whereas we see around 12 weeks as being more-or-less where market equilibrium is”.

To “achieve positive house price growth in ‘real’ terms” Loos believes economic growth must be nearer to 3%. He cautions that “a full blown recession … would cause “real” house price decline and nominal (actual) house price decline.

Hilton Tarrant works at YFM