The average house price across South Africa increased by 7% on a year-on-year basis during Q3 2010, down from the 11.3% figure recorded in Q2, indicating that year-on-year price increases are slowing, according to the FNB House Price Index.

On a quarter-on-quarter basis, the overall average house price index declined by -1.5%. Although the index is not seasonally adjusted, there is reason to believe that this price slowdown is more than just seasonal as the FNB Valuers Market Strength Index has remained negative all through the mini-recovery of 2009/early-2010, suggesting there is weak demand relative to supply.

Ewald Kellerman, property market analyst, FNB, said: “Considering the above factors, along with a host of economic factors, we retain the expectation of average price declines for 2011 as a whole, after an expected 6.4% increase in the 2010 average price over 2009’s average price. When the market is unbalanced in favour of supply, either demand has to catch up, supply has to drop, or prices have to fall. Indications are that supply of existing property is strong, with high levels of financial stress-related selling.”