SIKI MGABADELI: FNB says the housing market improved somewhat in 2014 and indications are it will continue to strengthen this year. The average house price for December rose 6.87% year on year, slightly faster than the previous month’s revised 6.85%.
FNB property sector strategist John Loos joins us now on the line. Happy New Year, John, and thanks for joining us. So – not an overall bad year, 2014, for the housing market.
JOHN LOOS: No, I think, Siki, if you look at a little bit longer than the last year, if you look at the last three years, three very good – not boom – years, the average house price growth was 7.1% for last year, 6.8% the previous year, 7.1% in 2012, averaging round about 7% a year, which is above CPI inflation. So it is positive in real terms. When it’s positive in real terms it normally reflects a very good balance between supply and demand. And that’s pretty much what we’ve had over the past three years as demand has gradually grown post the recession a number of years ago, and mopped up the oversupplies that were created at one stage. And now you’ve got a very well-balanced market.
SIKI MGABADELI: How are things looking for this year?
JOHN LOOS: I think this year as we go forward we might even see further improvement. We’ve seen our Valuers’ Demand Strength Index creeping up – that’s their perception of demand, and their supplier rating is still constrained. So I think we could still see a little bit higher house price growth. I’m pencilling in somewhere between 8 and 9% – again not a boom, but some improvement. And that is based on if you look at some of the economic factors we are seeing now, this oil-price shock – I say shock, it’s a positive shock, a massive drop in oil prices – which can mean that we have a big drop in CPI inflation, so real disposable income growth strengthens considerably as a result, and that obviously is good for the purchasing power of residential property. So I really think that we could be in for a better year this year in residential property.
SIKI MGABADELI: So we are seeing an improvement in the availability of stock?
JOHN LOOS: Well, that I think is going to start coming on line this year, but I don’t think it’s enough yet to alleviate supply shortages until we go into 2016. So I think one of the highlights is going to be substantial building activity or building completions in the residential space. And then we’d see that coming through in terms of perhaps some deterioration in the demand/supply balance and slow house price growth maybe next year. But I don’t think yet this year.
SIKI MGABADELI: Thanks to John Loos.
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