House price growth has moved sideways in January. This is according to the FNB House Price Index. The index shows that growth averaged 0.6% year-on-year in January. This is unchanged from December, which was revised from 0.8%.
House price growth in January
According to FNB Senior Economist, Siphamandla Mkhwanazi, the sideways movement in house price appreciation is consistent with their view that price growth bottomed in the fourth quarter of last year (2023).
Outlook: A steady recovery in sight
“A discernible upward trend should commence in 2H24, once affordability improves,” said Mkhwanazi.
He added that market strength indicators suggest that both the demand and supply of properties for sale are contracting, and by a similar magnitude.
What to expect in the residential property market in 2024
FNB Senior Economist, Siphamandla Mkhwanazi says following the above-trend transaction activity between 2H20 and 2022, demand for residential property is expected to have reached its nadir in 2023.
He furthermore said that available data suggests that mortgage volumes have declined by 28% to date, as affordability pressures kept prospective buyers at bay, and others seeking cheaper properties, as reflected by the compression in average loan sizes.
Mortgage volumes have declined by 28% to date
At the same time, data suggests that house price growth may also have reached its trough in 4Q23, at the lowest level since the Global Financial Crisis (GFC). The index also shows that lower-priced segments outperformed, reflecting the buying-down effect and the persistent supply deficiencies.
READ MORE: September 2022 – FNB Property Barometer
There were also some high-value segments, particularly in regions along the Western Cape coast, that gained support from the semi-gration trend which now seems to be normalising.
The economist added, “While affordability pressures should ease somewhat, a rapid rebound in activity and house price growth is unlikely this year.”
Final thoughts
He says they project home buying activity to move sideways in the near term, at levels 10% below the pre-pandemic average (between 2015 and 2019) but to pick up steadily over the forecast horizon.
FIND MORE: FNB reports
The gradual decline in inflation and borrowing costs, combined with employment gains, should modestly stimulate demand in the interest-rate-sensitive segments over the medium term. This could see volumes mean-revert by 2025. He said they expect volumes to grow by 0.8% this year, before lifting by 12.7% in 2025.
Mkhwanazi concluded, “We expect the FNB House Price Index (HPI) to average 1.4% this year, relatively unchanged from the 1.5% in 2023, before lifting to 3.0% in 2025.”
