The rise of S.Africa's residential market - CNBC Africa

The rise of S.Africa's residential market

Southern Africa

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New residential building completions is said to increase in 2015. PHOTO: peri

According to the FNB Property Barometer, this year's economic outlook appears more pleasing in comparison to last year, aided by the decrease in global oil and food prices. This will result in a decrease in consumer price inflation and an increase in real disposable income.

“These events, in turn, are expected to lead to further residential market strengthening and mildly higher house price inflation this year,” said FNB.

“But our forecast of a strong increase in residential building completions will have little to do with further residential demand strengthening in 2015, and more to do with prior years’ demand growth and the steady buildup of existing home supply constraints over the past three years.”

(WATCH VIDEO: 2015 drags in a mild deterioration in residential affordability)

If the South African Reserve Bank follows through with the normalisation of the interest rate then the pace of demand growth will be slower than it was last year.

“The reasoning behind a slower rate of growth in demand is the expectation of a mild deterioration in residential affordability as our average house price growth forecast moves up a notch from 7.2 per cent in 2014 to 8.7 per cent for 2015.”

The rate is predicted to surpass the average employee remuneration which is seen at 5.3 per cent for 2015.

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Although there has been a forecast in the strengthening of certain residential property numbers there is also a slight decline predicted in the average time of homes on the market. As well as a further rise in the FNB Market Strength Index.

“We believe that the 2015 'highlight' will prove to be a notable strengthening in the level of newly built residential units coming onto the market," said the bank. 

“This, in turn, is forecast to lead to some easing in residential supply constraints come 2016, resulting in slowing annual house price growth as we move into 2016 and beyond.”