FNB House Price Index: October 09

Nov 4, 2009

Seasonal stimulators and the recent interest rate cuts have contributed to a mild recovery in property prices. That’s according to the most recent FNB House Price Index.

FNB developed the House Price Index in July 2000 to estimate the average price of residential properties bought and sold. It is an attempt to provide a reliable indication of price trends for the South African house market.

The October 2009 House Price Index indicates that, on a month-to-month basis, property prices have increased by over 3%.

But this number may be influenced by seasonality says John Loos, property strategist for FNB home loans.

More importantly, property values have dropped by only 1% in October 2009, when compared to the same time last year.

This year-on-year drop in house prices is big improvement on previous months. And, according to Loos we should see a full recovery in house price growth by 2010.

One of the main reasons for this recovery has been the recent interest rate cuts. The effect of these rate cuts has taken a few months to filter thought to the consumer. Loos expects the full impact of the rate cuts to reflect in the property prices and consumer confidence by mid 2010. Until then rates are expected to remain unchanged.

Here’s a graphical illustration of the Prime Interest Rate changes.

“The average house value for the month [October] measured R751,323,” Loos said.

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