HILTON TARRANT: In My Property this week I spoke with John Loos, household and property sector strategist at FNB and put it to him this morning that while August’s house price index shows a slight acceleration from July, the number remains in line with inflation, meaning pretty much nil-nil.

JOHN LOOS: Ja, 6.4% year on year in August, so that’s since last August 6.4% up. It's up from a similar revised figure of 6.3% in July, so yes, given that CPI inflation in July jumped to 6.3% in real terms nothing notable in the form of increase.

HILTON TARRANT: So that number might look good as a headline number, but as you say in real terms pretty flat.

JOHN LOOS: Ja. I suppose in the context of the last two years it's pretty good, considering that we did have significant real house price decline at one stage. So the market has been improving gradually. If one looks at our values and how they rate demand – that has been gradually improving. They also believe that supply constraints have increased or there are more constraints, so it's about demand relative to supply and slowly but surely those fundamentals have been improving in recent times.

HILTON TARRANT: In your commentary to the house price index you say the residential market is in an interesting space at the moment. Why do you say that?

HILTON TARRANT: Well, it's interesting in the sense that we're very much in line with inflation. If one looks at the demand side, demand has been strengthening while at the same time we've seen a lot of economic numbers going the other way, GDP growth for the first two quarters this year not being wonderful and real household disposable income growth having slowed along with retail sales growth having slowed. So it almost seems as if the housing market has gone a little bit in the opposite direction to what the sort of household economic numbers have been going.

HILTON TARRANT: Also a very sane market at the market. People aren't overpaying, people aren't building massive developments with no demand, and people aren't speculating.

JOHN LOOS: Ja, very much so, which is a good healthy sign. I think the market still has a way to go until real house prices have fully corrected – in other words, I think there’s got to be some more real house price decline in the coming years before we get to possibly a situation where perhaps an average time on the market is nearer to two months rather than four months. So I don’t think we are there yet at the sort of equilibrium, but ja, certainly the buyers aren't rushing, it doesn't seem.
And if you look at where the SARB has interest rates, while prime rate is at 8.5%, it's still higher than our recorded house price growth. So there is not much opportunity for the speculator to make a quick buck on the back of price growth that’s faster than the percentage interest rate.

Hilton Tarrant anchors the daily national business news programme, the SAfm Market Update with Moneyweb.

This is his interview with John Loos FNB Home Loans taken from : http://www.moneyweb.co.za/moneyweb-safm-market-update/r-1783