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House price growth likely to be subdued

11 January 2013
Helmo Preuss

THE housing market has begun the year on a very weak economic footing‚ FNB’s household and property sector strategist, John Loos‚ said yesterday.

“We expect house price growth for the year 2013 as a whole to be slightly more subdued than last year and pencil in a nominal average rise of 2.5% for the year‚” Loos said.

With consumer price inflation expected to average 5%-6% this year‚ that implied a further fall in real prices‚ he said.

Loos highlighted recurrent issues such as ongoing financial pressure for many households‚ an overhang of the credit boom of the 2000s‚ which suggested affordability remained a priority for many in the housing market.

Homeowners would also still have to contend with above- inflation increases in municipal rates and utilities tariffs‚ which could exert further pressure on house prices‚ especially on the higher-priced end of the market.

Although Loos said further economic weakness could lead to further interest rate reductions‚ recent years had suggested the Reserve Bank was reluctant to cut‚ and any downward movement such as the lone rate cut in July last year was likely to be almost insignificant.

“The upside of expected very low price growth in 2013‚ for future aspirant investors at least‚ is that we expect yields on housing to broadly increase further‚ as they have been doing gradually since after the boom years‚ slowly improving property’s attractiveness as an asset class‚” Loos said.

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