Property prices to fall again?

The FNB Estate Agent Survey for the second quarter of 2010 showed agents pointing to weaker demand than that of the previous quarter. Of concern, too, was a sharp up-tick in the estimated average time of a property on the market, from a previous quarter’s 12 weeks and four days to 17 weeks and one day. This suggests that price levels have got further out of touch with reality. The implications could be that prices begin to come under pressure, and indeed in June we have seen a slowing in the pace of acceleration in house price growth. Prices to fall again?

Following relatively pedestrian growth in the median property price over the past few months, July marked the first month of real growth in the sector. The median house price increased by a further 0.8% m/m in July (2.3% m/m in June), marginally above the average monthly increase of 1.2% recorded since the start of the year, signalling an improvement in both demand and supply fundamentals. Thus, the median house price increased to R597 160 from a revised R592 500 in June, representing an increase of 7.3% y/y from 3.2% y/y in June. Although this increase is sharp, it needs to be borne in mind that this improvement is from a very low base this time last year, when the median price contracted by around 5%. In real terms, the median price jumped to 3.2% y/y from -1.0% y/y in June, in part also due to the falling inflation profile. Standard Bank expects inflation to moderate to 3.9% y/y in July from 4.2% y/y in June. Confidence sees market improving

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