It seems that 2018 could be the year where SA house prices begin to recover and finally track inflation.
Property economists are expecting more of the same in 2018 given the house price growth has barely kept up with inflation over the last two years.
At the same time, SA was grappling with a technical recession following three quarters of negative GDP growth and the world continued to reel from the global financial crisis.
Since then, housing activity has come under pressure and more recently, nominal house prices (before adjusting for inflation) grew by an average of 3,7% in 2017, according to FNB. This is the third consecutive year of national average house price growth slowdown from a multi-year high of 7% reached in 2014. Growth has since slowed each year, to 6% in 2015, 4.8% in 2016 and 3.7% in 2017.
John Loos, FNB household and property sector strategist, estimates that in real terms, house prices declined by 2,4% in 2017 based on 11 months’ worth of inflation data. However, official inflation data for 2017 is scheduled for release on 24 January.
Absa Home Loans property analyst, Jacques du Toit, believes by judging the number of house price forecasts, the decline in house prices might slow down. He believes that average house prices should shift a little higher to about 5% in 2018. FNB’s Loos predicts similar prospects.
After adjusting for inflation, house prices are not expected to grow in 2018, an antithesis to the trend of declines over the past two years. The SA Reserve Bank expects inflation to average 5% in 2018. The inflation outlook improved in 2017 due to food inflation falling to single digits from highs of above 10% in previous years
SA political uncertainty
However, the 5% house price growth forecast hinges on many factors: mainly the political and government policy environment.
“Uncertainty around policy direction makes forecasting even tougher than it would be under conditions of greater certainty, posing significant risks to forecasts,” he said
Should a widely-publicised rating agency downgrade for the country, it could easily dampen national sentiment, and this could easily filter into the housing market.
Dr Andrew Golding, chief executive of the Pam Golding Properties, supported Loos’s views, adding that Malusi Gigaba’s maiden annual budget speech as finance minister, to be delivered in February, will impact on business, consumer and market sentiment.
“It is expected that SA’s residential property market will continue to maintain its resilience, reflecting an ongoing healthy appetite for property investment – particularly in major metros and key hubs,” said Golding.
“The fact is there is a pent-up demand from a groundswell of aspirant buyers wanting to acquire a foothold in the property market, while others in the marketplace – both first-time buyers and existing homeowners – are seeking homes to buy or rent as career and lifestyle changes dictate a change in address.”