PUBLISHED 5 FEB 2010
prices rose 3,1% on average in January, following a 2,3% rise in
December, according to the latest statistics from First National Bank.
"But although this was the third consecutive month of year-on-year
price inflation," says FNB Home Loans property strategist John Loos,
"it does not change our expectation that price inflation won’t go
further than single digits this year , with a household sector still
under significant financial pressure, and the belief that interest
rates are at or near to the bottom.
"The SARB Governor did hint at the possibility of interest rate
reduction in the not too distant future, but given the 'downward
stickiness' of consumer price inflation, even were further reduction to
happen it would be unlikely to be substantial.
"The consumer price inflation rate actually rose from 5.8% year-on-year
in November to 6.3% in December, and even though it is expected to
return to the 3%-6% target range, both the SARB and ourselves expect it
to hug the upper end of the target band, limiting the scope for further
interest rate cutting."
Nevertheless, he says, the strengthening in the market is expected to
continue until around mid-2010 at least, with the full impact of last
year’s interest rate cuts still to feed through, and supported by a
moderately strengthening economy.
It will, however, be a mild recovery where primary residential buying
is the dominant focus. The FNB Residential Property Barometer for the
4th quarter, released last week, continued to show little sign of
buy-to-let buying increasing in importance relative to the overall
market, he notes.
Source: Property Trader