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%.

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%.

2015 has seen some positive growth, but Residential Building and Fixed Investment remains low.

Real retail sales growth for September continued to record a reasonably healthy growth rate under the weak economic circumstances.