House prices increased slightly on average last year compared with the year before, according to First National Bank’s House Price Index released on Tuesday.
However, an improving demand-supply balance hinted at improved average price growth to come this year, even if 2014 is set for anaemic growth in the economy overall, said FNB household and property strategist John Loos.
According to the index, the average house price was up 6.8% in 2013 compared with the year before.
This was a slight slowing in growth compared with revised 2012 average house price growth of 7.1%.
In real terms, when adjusting house prices for consumer price inflation, 2013 showed a slightly lower rise of 0.8%, compared with 1.3% in 2012.
Last year saw the second successive year of slight positive real house price growth following four prior years of average real price decline.
The average price of homes transacted was R891,976 in 2013, up from R835,480 in 2012.
In real terms, the FNB House Price Index remained well above levels of a decade ago. However, compared with the past decade’s real average price peak, reached in 2007, the 2013 average real price was still 18.5% lower.
In nominal terms, the 2013 average price was 145.2% higher than the 2003 price level, but only 19.3% above the 2007 level.
“Therefore, as at 2013, real price levels remained far above the levels of a decade ago, but still reflect a significant cumulative downward correction since 2007,” Mr Loos said.
He said FNB was not buoyant about the prospects this year for the South African economy.
“The reality is that South Africa has anaemic economic growth at best, with the 2013 average real economic growth rate looking set to come in at near 2%,” he said.
“Such a rate would mean the second consecutive year of slowdown in economic growth since a more respectable 3.5% rate was achieved in 2011.
“Slowing economic growth, in turn, is influential in slowing the pace of employment, wage growth and thus household disposable income growth.”
While few economists expect South Africa’s gross domestic product growth to have breached 2% last year, some — including forecasters at the Reserve Bank — are optimistic the country can reach 3% growth in 2014.