House Prices On the Increase

Nico Smit

16 June 2011

Low housing supply, particularly in the lower price segment, and the decline in newly built properties are the main reasons for a year-on-year 15,6 basis point increase in the First National Bank (FNB) House Price Index for January 2011.

The House Price Index, measuring the price of residential housing, is based on the median figure. This means that it is not the average price of residential properties, but rather the figure exactly in the middle of a given data set. The House Volume Index measures the number of properties registered at the Deeds Office, and is a total figure.

The FNB National Housing Index for January 2011 indicates that whereas the House Price Index rose by 16 per cent year on year, the House Volume Index increased by only 1,9 per cent.

The rapid decline in properties in the lower price segment and the decline in newly built properties on the market are cited by FNB as the main reasons for the increase in the price index.

In the lower price segment, the price index was up 20 per cent year on year, with upward price pressure mounting in the central housing market due to weak supply, as volumes were down 30 per cent year on year. The price index for the medium price bracket was up by 1,3 percent month on month, but moved sideways over the past year.

With regard to the upper price segment, the price index for properties rose 6,6 per cent on a monthly basis, however it remains two per cent below levels recorded at the same time last year.

With regard to the Housing Volume Index, FNB reports that this experienced a 23 basis point drop in January 2011 from a high base in December 2010. This is however contrasted by a year-on-year volume index increase of 1,3 per cent.

Despite all regional markets experiencing a significant declines, the coastal market was hardest hit with volumes down 26 per cent month on month.

In the central region, volumes decreased by 20 per cent, and Windhoek’s lower price segment experienced a dramatic decrease as volumes fell 61 per cent month on month.

FNB notes that mortgage advances to individuals grew to 8,6 per cent year on year. However, the monthly data suggests that growth in the primary mortgage bond market entered the declining cycle in January 2011, with growth figures falling 3,2 per cent month on month.

According to FNB, the secondary mortgage bond market increased 40 per cent, but it noted that developer activity stagnated in terms of the number of deals.

FNB does however expect that property prices will moderate in the second half of the year, as the supply of new properties is also expected to increase. This is as a result of increased land delivery as new erven accelerated to record levels, thus improving prospects for volume growth later in the year.

FNB has, as a result, revised its year-on-year growth to eight per cent from the 9,8 per cent growth rate forecast late last year.

AllAfrica – All the Time