May house price deflation continues, and we have to wait a little longer for any positive effect from interest rate cuts to become visible.
The FNB House Price Index’s decline continued in May, declining year-on-year to the tune of -11.3%. This represents a deterioration on the revised -9.2% rate of year-on-year decline recorded for April, and was the 6th consecutive month of year-on-year decline in the house price index.
As such, the expectation of nothing more than a very mild improvement in residential demand during 2009 continues, and with oversupplies still believed to exist on the market, house price deflation is expected to be with us for most of 2009. However, I believe that the worst year-on-year price deflation will show in the figures around mid-year, and that during the second half of the year we’ll begin to see the rate of decline subsiding.
At the most recent SARB interest rate meeting, the Governor did begin to prepare the market for a possible pause in interest rate cutting, so although all future interest rate decisions depend on how future economic events unfold, we should not expect too much in the way of interest rate cutting from here forward.
FNB House Price Index
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