Extract from the FNB House price index - Aug 2011

The August FNB House Price numbers provides what could perhaps be described as “mixed signals”. In year-on-year terms, the FNB House Price Index growth rate continues to accelerate. This reflects, with a lag, the mild resurgence in demand in the summer of 2010/11. On the other hand, while the seasonally-adjusted month-on-month growth rate continues to point to still-positive growth, it also indicates a slowing in growth momentum. This arguably reflects some weakening demand more recently during the winter months, not only as a result of seasonal factors but also due to no further interest rate cuts in 2011 as well as slowing economic growth (and likely household income growth too). Simultaneously, FNB’s valuers continue to suggest a deteriorating balance between supply and demand.

On a year-on-year basis, the FNB House Price Index rose by 6.1% in August (i.e. August compared with August a year ago). This represents an increase on the revised growth rate of 4.8% for July. In real terms, adjusted for CPI inflation, the year-on-year percentage change for July was still mildly negative to the tune of -0.5%, given that CPI inflation in July was 5.3% and the revised nominal house price growth rate for that month being 4.8%.