There are strong indications that the South African housing market is entering a douple dip. FNB has just released its August 2010 House price index whcih indicates that the year-on -year growth in housing prices has declined to 7.2% compared to 10.1% in July. The report also makes the important point that while the nominal increase is weakening , property prices are showing strong real growth - but that reflects a declining inflation rate scenario rather than the strength of the property market. The recent trend is also a reflection of the fact that the 500 basis point decline in the interest rates experienced in 2009 has now worked through the system. It is also unlikely that a possible decline in interest rates in the near future will not have a material impact on the market as the balance sheets of South African households remains weak. Recent market reports also suggest that the rental market is improving . This may indicate that potential owners are resorting to renting instead. In all , it is likely that the residential property market will remain weak for the rest of 2010.
Prof Francois Viruly
Viruly Consulting