FNB Property Barometer Dec 2014 House Price Index
Category News
Some positive economic factors going into 2015 lead us to expect a further mild increase in average house price growth for 2015 as a whole. Whereas 2014 saw an average price growth rate of 7.1%, we believe it quite possible that we could move up moderately into the 8-9% range for 2015 on average. This expectation is based on a combination of the recent sharp downward move in Global oil prices, a decline in Global food prices, and a Rand that has behaved reasonably in recent times.
The net result has been a sharp drop in imported goods price inflation, and this in turn has been the catalyst for a decline in Consumer Price Inflation back to below the 6% Upper Target Limit of the SARB (South African Reserve Bank). Not only does this reduce the pressure for the Bank to hike interest rates, but more significantly a decline in inflation can translate into a stronger growth rate in Real Household Disposable Income this year.
Real Household Disposable Income growth may also benefit from a mild expected improvement in Real Economic Growth in 2015. This expectation is not only based on lower inflation, but also on the assumption that strike-related production disruptions will be somewhat less than 2014, a year that saw extreme disruptions to especially the Mining Sector.
Such assumptions are admittedly not without their risks, and a further ongoing disruption risk emanates from the troubled Electricity Sector too, while the country’s wide Current Account Deficit on the Balance of Payments also poses ongoing Rand Shock risks.
But for the time being, as we enter 2015, recent economic events show promise for another solid, albeit far from booming, residential property year.
ARTICLE SOURCED FROM FNB PROPERTY BAROMETER DEC 2014
Author: John Loos
