January House Price Index up 5.1% y/y

January House Price Index up 5.1% y/y

Approximates Dec 2013 rise of 5.2% y/y

Modest HPI uptick permeates into 2014

* Growth in the Standard Bank HPI in 2013 averaged 7.1%y/y, down from 7.2%y/y in 2012 (see Data Release – House price index: 2013 – more of the same 8 January 2014 for further analysis). The HPI started to slow in August last year and slowed further to 5.1%y/y in January 2014.

* The index for freehold properties maintained its growth momentum, improving 6.3% y/y in both December 2013 and January 2014. Growth in the index monitoring sectional title properties (mostly flats and townhouses) slowed to 4.9%y/y in January from 5.6%y/y.

* We continue to ascribe the diverging price trends in freehold versus sectional title properties to their different supply dynamics. The number of flats and townhouses completed year-to-date is up 12.4%y/y, compared to completed freestanding dwellings which have contracted 5.7%y/y (within freestanding dwellings, the supply of new smaller dwellings (less than 80m2 in size) contracted 7.7%y/y while the supply of larger dwellings (of 80m2 or greater in size) grew 1.8%y/y).

* We anticipate that mortgage credit growth momentum may wane as rising interest rates and below potential GDP growth reduce lenders' risk appetite. The hesitant recovery in mortgage balances over the last year may reverse on the back of anticipated monetary policy tightening, combined with elevated household debt levels (75.5% of disposable incomes at last count). Slowing credit growth will pose a notable threat to HPI improvements, given their strong historical correlation.

* It is our view that HPI growth rates, while remaining on the right side of zero, are unlikely to best the 7.1%y/y average growth rate seen in 2013.

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05 Aug 2015
Author Standard Bank

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