Perhaps one contributing factors to the formation of residential property “bubbles” or “overshoots” across the world over the years is the lengthy leads and lags between the start of a “negative” economic event, such as an interest rate hiking cycle, and the start of a rising trend in bad debt levels.

According to the FNB Estate Agent Survey, for the 1st quarter of 2016, 1st time home buying slowed when expressed as a percentage of total home buying.

John Loos, Household and Property Sector Strategist at FNB observes 'a tougher year for residendial mortgage lending ahead, as the residential property market slowly moves into its super-cycle “Correction”.'

The Reserve bank (SARB) Monetary Policy Committee (MPC) decided today to hike its policy Repo Rate by a further 50 basis points to 6.75%, a move that will see Commercial Banks raise their Prime rates to 10.25%.

Wednesday, 20 January 2016 21:52

House prices a signal of gloom

The trouble with house prices is because of a booming market that causes consequence of upbeat consumer confidence.

In December 2015, the FNB House Price Index inflation rate continued its mild year-on-year growth uptick of recent months.

The pressure that for some two years now has been felt by the South African consumer, although regrettable, could be having a beneficial effect in one respect.

Economically, we are likely in the early stages of what I call the “stagnation” or “correction” phase of the economic super-cycle, “early” meaning perhaps 4-8 years in (depending on whether you ignore the short growth up-tick around 2010/11 and start the clock in 2008, or otherwise start counting from 2012), and the length of such super-cycle stagnation phases can conceivably roll on for far longer than that.

The still-reasonable real growth is in part about reasonable nominal sales growth, which measured 7.3% year-on-year in October, but also still very much about low Retail Price Inflation of 3.9%, contained by a broader benign inflationary environment that currently persists in South Africa.

The November CPI (Consumer Price Index) inflation rate edged slightly higher, from 4.7% year-on-year in the previous month to 4.8%.

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