ITS MY HOUSE: FNB Residential Property Barometer & Estate Agents Survey results
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Annual growth in the FNB House Price Index moved marginally lower in October, averaging 3.0% from 3.1% in September. Slower price growth from post-pandemic highs reflects relatively softer demand amid higher living costs and deteriorating affordability. Market volumes continue to soften, albeit modestly and are still above pre-pandemic levels . This is also reflected in the buoyant property transfer duties, which jumped by 21.7% y/y in September (or 25.6% in 3Q22 compared to the same period last year). In line with this, mortgage extension remains relatively robust, with the latest data showing growth of 6.9% y/y in September, much quicker than the post-GFC average of 3.8%. Nevertheless, surveyed data shows signs of a weakening market, with estate agents activity slowing towards the long-term average, and property sales due to financial pressure building up in lower priced segments.
The rental market has continued on a gradual recovery path. Vacancy rates have slowed from pandemic-induced highs of 13%, to 7.8% in 3Q22. However, vacancy rates remain above the pre-pandemic average of 5.3% between 2017 and 2019 (Figure 4). Commensurately, rental inflation increased by 2.8% y/y in 3Q22, up from a trough of 0.6% in 1Q21. The recovery in rental inflation is in line with post-pandemic support factors, such as the speedy improvement in aggregate incomes and household demand, along with improved mobility as more people revert to in-office work. Furthermore, rising borrowing costs likely diverted some homeownership demand to rentals, allowing landlords some headroom to increase rental escalations. Nevertheless, the pace of the recovery is still constrained by weak employment growth, and a rising cost of living. Overall, while demand is improving, there is still excess supply in the market, as reflected by the declining average real rental rate, as well as above-average vacancy rates
The rental market has continued on a gradual recovery path. Vacancy rates have slowed from pandemic-induced highs of 13%, to 7.8% in 3Q22. However, vacancy rates remain above the pre-pandemic average of 5.3% between 2017 and 2019 (Figure 4). Commensurately, rental inflation increased by 2.8% y/y in 3Q22, up from a trough of 0.6% in 1Q21. The recovery in rental inflation is in line with post-pandemic support factors, such as the speedy improvement in aggregate incomes and household demand, along with improved mobility as more people revert to in-office work. Furthermore, rising borrowing costs likely diverted some homeownership demand to rentals, allowing landlords some headroom to increase rental escalations. Nevertheless, the pace of the recovery is still constrained by weak employment growth, and a rising cost of living. Overall, while demand is improving, there is still excess supply in the market, as reflected by the declining average real rental rate, as well as above-average vacancy rates
