The FNB HPI is still under 1% despite recent improved conditions.
The South African housing market has shown signs of recovery, as reflected in the latest data from the FNB House Price Index (HPI).
However, the HPI is still under 1% despite recent improved conditions. This suggests the price growth in the housing market is slow.
The Index tracks residential property price changes in South Africa, based on data from home loan transactions by the Bank. It measures the average price of homes, adjusting for seasonal and outlier variations.
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About the Housing Price Index
The index is updated monthly and provides both nominal and real price changes. It covers various property types and segments, including metro and non-metro areas. The index is a key tool for understanding trends in the housing market.
John Loos, Senior Economist: FNB Commercial Property Finance says in November, the index averaged 0.8%, a slight decline from 0.9% in October. This shows house prices are not growing rapidly.
The revision is driven by updated Deeds data, particularly in the Gauteng region, suggesting that house prices bottomed out around June, aligning with earlier market expectations.
“This earlier trough has been linked to improving sentiment, signaling the beginning of a market recovery.”
Index shows housing prices recovery
He says the revised data indicates an uptrend in house prices, which aligns with findings from other market indicators.
“Notably, the FNB Estate Agents Survey reported a surge in activity across key regions, including Gauteng and the Western Cape.”
This surge has been accompanied by a reduction in the time it takes to sell property, signalling a positive shift in the market.
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Borrowing costs and affordability
Loos adds that increased market activity is expected to continue, as sentiment remains strong and anticipation of further rate cuts grows.
It is anticipated that lower borrowing costs will stimulate demand, especially in the lower-priced segments, where affordability continues to pose a challenge for many buyers.
Despite the uptick in buyer interest, it has been noted that real house prices remain lower than they could be, according to historical comparisons with market strength indices.
“This divergence suggests that while buyer activity has increased, market forces have yet to generate significant upward pressure on property values.”
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Cautious Buyer Behavior
He says even though optimism is growing, caution prevails among buyers who continue to prioritise affordability.
“This caution is reflected in the subdued levels of mortgage extensions, which have averaged 2.8% year-to-date, down from 5.7% in 2023.”
Loos is of the view that the outlook for the housing market remains cautiously optimistic, with several positive factors expected to drive growth in the coming years.
Easing inflation, a decline in borrowing costs, and improving real incomes are all contributing to a more favourable environment for potential buyers.
Furthermore, consumer sentiment is strengthening, providing an additional boost to the market. House price growth is projected to average 0.8% in 2024, before climbing to 1.7% in 2025 and approaching 3% by 2026.
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