Please find attached the latest edition of the FNB Residential Property Barometer.
Key themes
• Market volumes remain relatively supported, but softening. Sentiment and forward-looking activity indicators suggest more weakness ahead. However, this varies by location and price segment.
• The risk of a less transitory rise in inflation and higher inflation expectations, and the more aggressive policy tightening in advanced markets, should result in the SARB further front-loading interest rate hikes. We now expect 50bps hikes in July, September and November, bringing rates to 6.25% by end of 2022. We pencil in another 25bps in January 2023, which will bring the terminal rate to the pre-pandemic level of 6.5%.
• The steeper-than-expected interest hikes suggest a less supportive environment for home buying activity. However, the shift in housing needs and the intensifying competition among lenders, should continue to support activity.
• While hiring intentions indices continue to suggest a recovery in headcount in certain industries, we are concerned that the more intense bouts of load shedding may dim these expectations.
Annual house price growth moved lower in June The FNB House Price Index growth moved slightly lower in June, averaging 3.4%y/y from 3.8% in May (revised up from 3.7%). This takes the 2Q22 average house price growth to 3.7%, versus an average inflation forecast of 6.6% during the same period. Slower price growth is on the back of softer demand, amid higher living costs and the waning interest rate support. Nevertheless, the home buying market remains resilient, as reflected by the still strong market volumes. We maintain our expectation of average house price growth of 3.5% y/y this year, lower than the 4.2% registered in 2021. As we show in this report, outcomes vary across market segments. In this report, we also provide a summary of our latest Estate Agents Survey, and an update on our property market outlook. Full report attached.
Regards,
FNB Economics