Property News: FNB House Price Index
The positive effects of lowering interest rates have not filtered through the market yet. The FNB House Price Index report, released at the start of June, shows that property prices continued to drop in May 09.
The average property house is now about R662, 000. This is an 11.3% drop in value since May 08.
John Loos, FNB property strategist, explains that the price deflation is the result of a sizeable oversupply that has built up in the residential market, with selling due to financial pressure being a key driver of supply. With SA officially now in recession, conditions in the South African economy are hampering the pace of residential demand growth despite a series of interest rate cuts having already taken place.
The graph below illustrates the rapid growth of property prices between 2004 and 2008. During this period the average property price shot from around R450, 000 to over R750, 000. Since Oct 2008 the average property price has consistently dropped.
Click here for a graphical illustration of how interest rates have changed.
The Outlook For 2009 – slow but getting better
FNB predicts that property prices will continue to decline for most of 2009. Although the rate of the decline should begin to slow as the effects of the interest rate cuts begin to take effect.
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