The January 2011 FNB House Price Index showed further slowing in year-on-year growth, after previous months' data releases had hinted at some possible stabilization.

For January, the year-on-year growth rate in the Index was 1.4%, which was significantly lower than the revised 3.1% for December. In real terms, i.e. adjusting for a December consumer price (CPI) inflation rate of 3.5% year-on-year, this means that December saw -0.4% real decline.

The slowing year-on-year growth rate in the average house price remains largely driven by weak demand growth, which in turn is the result of, firstly, a weak economy and its constraining effect on household income growth, and secondly the high levels of household debt relative to disposable income. But strong residential supply, an overhang from the building boom of a few years ago as well as high levels of financial pressure-related selling, also plays a key role.

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Article: www.realestateweb.co.za