House prices down 21% – and falling – since the peak

Expect the gradual ‘correction’ to continue into 2019 …
After the impact of inflation, house prices are down roughly 1% year-on-year. Picture: Bloomberg

In real terms, including the impact of inflation, house prices have declined by 20.8% since August 2007, the peak of the pre-2008 boom period. This is according to November’s FNB House Price Index, published by John Loos, now property sector strategist at the bank’s commercial property finance division.

In it, he argues that the index remains at “relatively high levels” when considering the longer-run performance (ie. since 2001), but it is obvious that house prices have effectively been flat for the past decade. Loos says the bank doesn’t, however, believe that this cumulative real price correction to date has been sufficient to bring real home values back into line with what are now very weak economic fundamentals.

Source: FNB

The index for 2018 continues to “hover in low single-digit growth territory not too far from 4% year-on-year,” says Loos, adding that the low single-digit growth in nominal terms continues to translate into a year-on-year price decline in ‘real’ terms, when adjusting for CPI inflation. “This means that the gradual housing market price ‘correction’ continues, as it has since early-2016.”

After the impact of inflation, house prices are down roughly 1% year-on-year.

This means house prices continue to decline from that peak in 2007, with the -20.8% figure set to get worse. 

Property intelligence outfit Lightstone reports even lower house price inflation, at just 3.5% in its latest report (for October). FNB saw (downwardly) revised growth of 4.1% in October.

While FNB and Lightstone use similar methodologies to calculate their house price indices, the datasets are different. FNB’s is based on “residential properties financed by [the bank] over the past 18 years” while Lightstone uses the broader set of Deeds Office data. Both exclude anomalies and outliers.

Lightstone’s area value band breakdown shows ‘mid-value’ homes far outperforming the rest of the market, with growth of 6.1% year-on-year in October. These are homes priced between R250 000 and R700 000. High-value homes (R700 000 to R1.5 million) are up 3.3%, while low-value homes (under R250 000) are up 2.7% in the month. Luxury homes (over R1.5 million) are barely positive in nominal terms, up 0.5% year-on-year. Add in the impact of inflation (5.1% in October) and the picture looks decidedly more negative.

The performance of these segments squares with FNB’s research, although the bank defines its categories with very different – far higher – average selling prices. These range from R1.05 million to R6.8 million.

In a separate report, Loos points to the fact that while “in the initial stages of the housing market slowdown, starting around 2014, it was the higher income end of the housing market that appeared to lead the way ‘down’ … more recently, it appears that [these] segments have been showing signs of ‘relative stabilisation’, albeit at already-weak levels”.

The middle and lower income segments have, he says, been weakening more noticeably from their relatively stronger levels. “This can be a sign that financial constraints and pressures amongst households at the lower end are becoming more significant, and this can become a ‘relative drag’ on these segments’ performance.

“Therefore, a key theme in 2019 may be a ‘convergence’ in performance of the various income/price segments of the housing market, the lower-to-middle end’s relative ‘outperformance’ fizzling out.”

Source: FNB

Loos says it appears likely that the average house price growth rate for 2018 will be slower than that of 2017, making this the fourth consecutive year of average price growth slowdown. He highlights the fact that “FNB’s valuers” continue to point to housing demand weakening.

To November, the average house price growth rate is 3.7%, compared to the 4.3% of 2017. He points out this is noticeably slower than the 6.8% high reached in 2013.

While the bank’s economists forecast GDP growth of 1.4% in 2019, versus the 0.7% for this year, it says that projected higher interest rates will “offset the mild support for the housing market” coming from slightly stronger economic growth.

The bank sees a further interest rate hike next year after the one in November 2018.

In 2019, FNB projects “nominal average house price growth to be 3.7% for next year” (in other words, very similar to the 2018 likely outcome). Given the bank’s economics unit forecast of CPI of 5.3% for 2019, “this would translate into another year of house price decline in real terms”.

A 1.6% decline, to be exact.

Hilton Tarrant works at YFM. He can still be contacted at



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There is no decline – 3.7% = R37000 per R1mill, R74000 per R2mill.
How many south africans save that kind of money every year???
Buying is still the best option!!!

Gosh…..mind blown!


On 1 million you earn more than 37k in the bank and I certainly earned much more on my overseas investments.

Lost 47% on my BATS share! Wish I had invested in another property. I would have been 50,7% (47% plus 3,7%) better off!!

It is silly to invest only in one share. I have known people who simply could not sell their house in Joburg because some shack dwellers moved into the area. They would have been happy to get the same price as they paid for it 10 years earlier. In the end they abandoned it and moved overseas.

Why buy and pay rent to live in your house?

Rates and Taxes are very high (nearly as much as a rental),
plus you have the threat of EWC?

Housing assets were sent unrealistically high between 2000 and 2007.

This is a normal correction for a sector that is full of emotion.

Crash is still coming because the house prices are still no where in line with salaries. You got stagflation(high inflation and low economic growth) but high house prices, it is not sustainable. The house prices don’t reflect the economy, we are in housing bubble.

In Cape Town the housing market is flat, it is taking a lot longer to sell a house.

If house prices are not in line with salaries, then how out of line are car prices?!

It may be more instructive to look at a period other than from the top of a speculative bubble? What would the stats be from say 2009 or 2005?

I just wish one could as easily get 90% financial leverage on shares as on a house!

2009? Prices have been flat.
The first chart above is clear as day.

Johan Buys didn’t read the article.

Hilton: if you cannot see the difference in that graph on what date you run a time series from, then I am afraid there is actually no cure for your ailment.

….and bear in mind, SA is lagging the world in an increasing interest-rate environment.

The current pain will continue.

No no-you guys do not understans Loos. It is a good time to buy.

Pity the semigant pillock who “snapped up” his R6Million Kenilworth townhouse before the Day 0 DA-saster…

is now worth R12bar!

Can and will Land expropriation without compensation have an further influence on this figure of 21% ?

Cape Town is in a housing bubble, we are going to have a house price crash sometime, the few buyers with the money to be able to buy are going to dry up. There is already an oversupply of houses on the market and the moment the housing market in Cape Town is flat.

If the South African Reserve sticks to its mandate to keep inflation under control and to keep the rand stable against the US dollar, they will be forced to increase interest rates more in the future which will result in fewer buyers.

3.7% increase may sound great until you factor in Inflation- the ‘real’ rate you experience as a property owner,, not the the Govts general one!!

Remember Rode saying about 5 years ago that the housing market was still about 25% overvalued.Guess then it’s still got to drop about another 19% in real terms until it’s at fair value!

The price of property is only half of the story….
The real story is the amount of transfers going through the deeds office.
down 50% perhaps more year on year.
EWC has taken the confidence out of the market. BIG TIME

Thank You for speaking some truth because estate agents are still trying to talk up the property price.

Houses are overpriced in Cape Town end of story.

but EWC will not affect residential properties!?

Is there not also an element of house prices being undervalued pre- 2001? Perhaps growth got a bit overheated in the period between 2001 and 2007, but I think the the base of 2001 (which is really where the change of 1994 started gaining momentum, interest rates started cooling off and FDI was pumping) is pitching it too low. Yes, property was overvalued by 2007, but I don’t think the low base of 2001 is reflective of fair value for property back then, so the decline going forward appears to be forecasting the trend in the correct direction, just not quite that severe. If anything is going to push house and property prices down, it will be Expropriation Without Compensation.

Apparently the Australian property sector is facing a similar grim scenario.

Japan is giving away homes due to oversupply.

A fixer upper house in a village in sardinia costs $1

And there interest rates are lower.

Factor in the lack of interest from millennials to own their own homes or start families.

For as long as i remember i have been listening to stories of imminent price crashes. And though there have been temporary declines, through sanctions, droughts, political instability, bad governments house prices generally increase and surprise.

To better understand how paranoid people are, go and look at what house prices have done in place like Iraq(baghdad), Zimbabwe(Harare), Syria (Damascus), Israel and other places subject to extraordinary instability and challenges. Almost always surprisingly strong relative to what you would expect, specifically referring to the central areas where expats generally hang out.

For interesting data giving extra perspective check out property index by country on

Indeed, houses in South Africa are some of the cheapest in the world and also good quality. I don’t trust the wooden houses the Americans live in or the old houses the Europeans live in.

Houses are not investments, they are lifestyle expenses.

When you buy a house you start with a new house. Then decades later when looking at your house it is still just have a house, just a much older house. Any gains you think you got is just the currency that “weakened”.

Money chief:

Correct. People have to live somewhere, so Rx capitalized at whatever rate is a living investment not a savings/retirement investment. Few people understand the difference about how much of a home spend is sunk cost

So a R2mil house is a luxury house? I bought a house for this much and it is far far from luxury. Mind you it was the cheapest in the complex.

Whether you rent or buy, you need to participate in housing. While appreciation is not guaranteed, you can protect yourself from rising rent, increasing drive times but expose yourself to rates, corrupt municipalities and fixed assets that can be taken away. Enjoy

As Warren Buffet said…when people are running scared it’s a good time to buy! He’s never been wrong yet – is this perhaps the first time?

End of comments.





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