| Dear Business Partner Please find attached the latest FNB Residential Property Barometer. In summary: The FNB House Price Index growth averaged 0.8% y/y in December, marginally higher than the 0.7% in November (revised from 0.5%), and a low of 0.5% in October. This suggests that annual house price growth averaged 1.5% in 2023, in line with our expectations. The marginal uptick in the last three months of 2023 signals that price growth may have reached its trough. That said, we expect the weak house price growth trajectory to continue for a little while, amid heightened uncertainty. In addition to the potential impact of the election cycle and a possibility of further fiscal slippage on currency stability, the heightened geopolitical tensions, biosecurity risks as well as adverse weather patterns complicate the deceleration trend in inflation and could prolong the lift in inflation expectations away from target. This could cause interest rates to remain high for longer than we currently anticipate and extend prevailing market weakness. Nevertheless, our base case view suggests that the gradual decline in inflation and borrowing costs from 2H24, combined with some employment gains, should modestly stimulate demand in the interest-rate sensitive segments over the medium term, which would support a moderate uptrend in house prices. In the report, we also provide detail of the 4Q23 Estate Agents Survey. Results suggest that that home buying activity levelled out and showed a marginal uptick in 4Q23. However, forward-looking indicators suggest that the increase in activity might be short-lived, with agents focusing on the affordable market turning relatively pessimistic on the near-term outlook. While part of this is due to seasonality, concerns around affordability, the cost of living, and lack of job security were cited as main cause for concern. In addition, the normalising semi-gration trend may also have influenced agents’ outlook on the Western Cape market, weighing on overall market expectations. Full report attached. Regards, Economist FNB Economics, Wealth and Investments |
