A surge in average house prices

THE average house price for May rose 8,1% year-on-year, First National Bank (FNB) said last Monday.

This was slightly higher than a revised 7,9% for April, the bank’s household and property sector strategist, John Loos, said in a statement.

“The solid performance of the housing market in recent times appears to go somewhat against economic fundamentals which are currently very weak,” he said.

Real house price growth, which was when house prices were adjusted for consumer price inflation, came in at 1,73% year-on-year in April. May’s Consumer Price Index (CPI) was not yet available, said Loos.

This represented a slight slowing from a revised 1,9% real price growth in March. This was due in part to the pace of CPI inflation having quickened from 6% in March to 6,1% in April, he said.

“While the 8,1% May house price growth rate was slightly up from the prior month’s 7,9%, we don’t read too much into such a mild acceleration,” said Loos. “The broader picture in house price growth appears to be one of settling around the 8% mark in recent months.”

He said some key frequency economic indicators in May continued to suggest a possible slowdown in the rate of increase in house prices in the not too distant future.