House price inflation rose by 10,4% year-on-year (y/y) in July, down from 18,8% jump in June and the 10,9% increase May, the Standard Bank’s residential property gauge showed on Wednesday.
The growth brought the median house price to R585 000 from R620 000 in June and R600 000 in May. The five-month moving average growth rate, which is a popular measure used to gauge trend growth, escalated modestly to 11,1% y/y in July from 10,8% y/y in June.
“The last three months’ data, especially June’s, should be interpreted with some circumspection since they are likely to have been subjected to several distortions,” said Standard Bank.
The bank added that over the last three months it was difficult to gauge the property trends due to long weekends and school holidays in April, the introduction of e-Natis on vehicle sales — a major household spending barometer — and the introduction of the National Credit Act in June.
“Notwithstanding these hitches, we are of the view that July’s data are virtually back to normal and present a fair indication of pricing activity in the residential property market,” it said.
The June sharp increase in prices was influenced by two factors. First, by the relatively low base value established a year earlier when house price growth dipped from 12,5% y/y in May to 6,5% in June 2006, the bank said.
“This low base value from which this year’s y/y growth rate is calculated is artificially boosting the rate of increase. This effect is expected to impact on the y/y growth rates from June through September this year following comparatively low growth rates during the corresponding months last year,” it said.
The second disrupting feature was a change in the distribution of mortgages granted and hence included in the sample used to calculate the median house price.
Looking ahead, the bank said the medium-term outlook was still buoyed by a relatively constructive macroeconomic setting. But a further tightening of monetary policy at the next Monetary Policy Committee meeting, which was a strong possibility, would change the financial environment and thus the outlook for the housing market. ‒ I-Net Bridge