House prices top 2008 peak

Although housing activity as measured by the number and value of sales is still some 50% below the level recorded at the height of the boom, house prices have recently surpassed their February 2008 peak.

House prices fell by only 8% from peak to trough (February 2008 to May 2009) in contrast to many international markets like the US, UK and Europe where house prices fell by up to 30% over the past two years.
Latest housing data from FNB show that in November the average price of a house was 2,8% higher than the peak recorded in February 2008. That means that house prices fell by only 8% from peak to trough (from February 2008 to May 2009) and is in contrast to many international markets like the US, UK and Europe where house prices fell by up to 30% over the past two years.

Many of these housing markets have yet to see prices recover to pre-recession levels. For instance, in Ireland house prices are now back to levels last seen in 2002, according to latest data from UK-based property group Knight Frank.

FNB’s latest housing index further shows that South African house prices are up 36,5% over the past five years to November. That’s roughly in line with inflation, which means that in real terms (after adjusting for inflation) South African homeowners have seen little, if any, growth in the value of their residential bricks and mortar over the past five years. But over the 10 years to November house prices are up a healthy 205%. That translates into real growth of 66%.

Homeowners and property investors should, however, not expect too much action on the house price growth front over the short term. FNB property strategist John Loos says despite signs of a mild improvement in residential demand the market still faces a number of challenges.

The key longer-term challenge for the residential market remains the high household debt-to-disposable income ratio, which was still at a record high of 78,2% in the second quarter. Says Loos: ``The still-high household debt ratio, unfortunately, leads us to expect another pedestrian year in 2011 for residential property, following a very mild short term up tick.’’ - Info supplied by Property 24.