House prices have grown in nominal terms (when not adjusting for Consumer Price Index (CPI) inflation) by 318% since the end of 2000; consumer goods and services prices, as measured by the CPI, were only 154.7% higher over virtually the same period (up to August 2017 due to September CPI data not yet available).
This is according to John Loos, FNB’s household and property sector strategist, who said that when inflation was taken into account, average house prices were 63.9% above the end-2000 level.
Comparing house price growth to the end of 2007 (almost a decade ago), real house prices were -19.2% down at the end of August 2017.
“The FNB House Price Index for September 2017 rose by 4.1% year-on-year,” said Loos, noting that this was a mild acceleration from the revised 3.8% for August. “In real terms, when adjusting for CPI inflation, the house price correction gradually continued, with the real rate of house price change remaining in negative territory to the tune of a -0.9% year-on-year decline in August (September CPI data not yet available). This is a diminished real house price deflation rate, however, from -1.1% year-on-year in July and from a low of -4.8% reached in December 2016.
“This diminished real price decline in August was due to the acceleration in the year-on-year house price inflation rate of that month from 3.4% in July to 3.8%. However, a slight rise in CPI inflation from 4.6% year-on-year in July to 4.8% in August partly offset the effect of the house price growth acceleration.”
The average price of homes transacted in September was R1,102,394.