The SA housing market is entering a double dip

Posted by Viruly Consulting on Thursday, September 2, 2010

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