The FNB House Price Index (HPI) shows annual house price growth accelerated further in August, reaching 2.8% y/y, up from 1.8% in July (revised up from 1.4%). Looking ahead, the historically low interest rates and lower transfer duties (particularly in the middle-priced segment) will continue to support activity, and by extension, house prices in the very near term.
On Thursday President Cyril Ramaphosa announced South Africa's reconstruction and recovery blueprint, as the country's response to the devastating impact of the pandemic. In all, the plan is expected to contribute an additional 1.7% to South Africa's baseline, lifting potential growth to an average of 3% over the next 10 years. Manufacturing production declined by 10.8% y/y in August, while retail sales volumes for August show a continued improvement in shopping activity.
Mortgage applications are at multi-year highs, and approvals are rising. In the passenger car market, while new car sales have vastly improved since hard lockdown, data shows a stronger shift towards second-hand cars.
The 2Q20 Quarterly Labour Force Survey revealed a severe deterioration in labour market conditions. As lockdown restrictions are lifted, we expect that some jobs will be regained, but that the labour market to remain fragile in the next quarters. South Africa's private sector credit rose by 3.9% y/y in August, following a 5.1% increase in July.
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