FNB Property Barometer : Price Growth Slowed for the First Time in Almost a Year
Key themes in FNB Property Barometer
FNB’s proprietary market strength indicators show that demand is now moderating, following a strong rebound in 2020 and into 2021. However, these remain above pre-pandemic levels, in part reflecting the positive effect of lower interest rates on market activity.
Liquidity remains intact: mortgage extension continues to grow at a faster pace, and loan-to-price (LTP) ratios remain high. Our investigations show that much of this credit is funding purchases in the middle- to upper-priced segments.
Nevertheless, longer-term demand fundamentals remain uninspiring: latest labour market data shows that there are still 1.4 million fewer people employed compared to the same period last year, and that employment gains made in 2H20 were somewhat reversed in 1Q21, which could weigh on wage income growth. However, we note a potential upside on non-wage income, especially dividend income, which could ameliorate income growth for upper-income households.
Price growth slowed for the first time in almost a year
Following 11 months of successive gains, the FNB HPI annual house price appreciation slowed in May to 4.1% y/y, from 4.6% in April. The slowing pace of price growth coincides with the slowing of our propriety demand indicators, namely the demand strength indicator derived from our property valuers’ database as well as internal volumes of mortgage applications. Both indicators declined in the past two months, perhaps suggesting that the interest rate-induced demand may have peaked, following a strong rebound in 2H20 and into 2021. However, these remain above pre-pandemic levels, still reflecting the positive effect of lower interest rates on market activity.
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