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House prices return to positive growth
December 2, 2009
By Roy Cokayne
House prices last month surprisingly bounced back into positive growth after almost a year of price deflation.
John Loos, an FNB Home Loans strategist, said yesterday house price inflation had returned a few months earlier than previously expected and the pace at which this had happened led the bank to believe its previous forecast of an average 5 percent increase in house prices next year was "slightly on the conservative side and an upward revision would be in order".
Loos said FNB still expected single-digit average price inflation for next year but at a slightly higher rate of 7 percent to 8 percent. FNB's house price index last month rose 2 percent year on year from the revised minus 0.9 percent in October.
The growth in the index follows a period of house price deflation that started in December last year and peaked at minus 8.3 percent in May.
Loos said although November was the first month of return to year-on-year price increase, last month's number was just the continuation of an improving trend that started in the form of diminishing house price deflation from about June, which was a lagged response to gradually rising demand from early in the year as interest rates began to fall.
Standard Bank said yesterday its property book for the first 11 months of this year revealed an average monthly decline of 4.3 percent in the median house price, but the rate of contraction improved slightly last month to minus 4.5 percent year on year from minus 4.6 percent in October.
Johan Botha, a Standard Bank economist, said this brought the number of monthly declines to 18 consecutive months but "there are signs that the residential property market has turned the corner and that interest in residential property is returning".
"Prospective buyers are returning and the loosening of credit criteria announced at the beginning of September is being reflected in the number of loan applications and loans being granted.
Jacques du Toit, a senior property analyst at Absa Home Loans, said he expected the positive house price growth to continue and move even higher, adding that transaction volumes had also picked up in recent months. However, Du Toit said the recovery would still be gradual.
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