While the FNB House Price Index’s decline continued in July, there was some hint that the rate of decline may be starting to diminish, the bank said on Monday.
”This, however, does not mean a sustainable national price increase just yet, but for the time being a possible slowing in the rate of price decline,” said FNB’s property strategist John Loos.
On a year-on-year basis, the index declined by -9,5%, slightly less extreme than the revised -9,7% rate of decline in the previous month, Loos said.
”This comes after a period of continuously declining price inflation, and more recently accelerating price decline, which spans back to the beginning of 2008,” he said.
He said it would be premature, based on one data point, to conclude that this was the start of a sustainable improving trend.
However, certain economic events did lead to the possibility that this could be the case, Loos said.
”Admittedly, with the economy being in recession, any improvement in the residential property market will probably be mild and slow going at best.
”However, despite the pressure on incomes, a massive 450 basis points’ worth of interest rate cuts has led to the household debt-service ratio declining during the first half of 2009, improving the household sector’s ability to service debt.”
Loos said he was starting to see some improvement in the home loan arrears situation, while there had also been a mild increase in transaction volumes in recent months.
In addition, estate agents surveyed in FNB’s Property Barometer survey had said that they had experienced some limited improvement in residential demand activity since late last year.
However, Loos said it would only be known in another few months if a trend of diminishing price decline had begun.
He said as yet it did not appear that oversupplies of property on the market had been eliminated, ”and as such it is probably realistic to expect more price decline albeit possibly at a slowing rate in the second half of the year”. — Sapa