1. FNB House Price Index – March 2014 Still reflecting a solid, well- balanced residential market 1 April 2014

2. March 2014 FNB House Price Index Findings Average house price for March 2014 was 8.6% year- on-year, unchanged from Februarys 8.6%. Real house price growth (i.e. when house prices are adjusted for CPI inflation), came in at 2.48% year-on- year in February. The average price of homes transacted was R951,490. In real terms, the FNB House Price Index is 26.1% above levels of a decade ago (February 22004) However, compared with last decades real average price peak, reached in December 2007, the February 2013 real price was still -17.3% lower

3. FNB Valuers point to further improvement in market strength in March The FNB Valuers Market Strength Index (Explanatory notes on page 5) is now getting very near to the crucial level of 50. This implies that the Index has nearly reached a level where the valuers aggregated demand rating draws equal in strength with the aggregated supply rating. The Market Strength Index pointed to further improvement in the market demand-supply balance in March 2014, to reach a level of 49.52. The increase in the Market Strength Index continued to be fuelled by the combination of growth in demand along with mounting supply constraints.

4. Outlook Residential market remains well-balanced. However, expectation remains for some mild slowing in house price growth later in 2014 (5-6% by year end), with economic fundamentals weak SARB Leading Business Cycle Indicator for January showed further year-on-year decline to the tune of -2%. Slow employment growth has slowed nominal disposable income growth late in 2013 We expect prime interest rate to rise further to near 10% by end-2014

5. Speculative activity expected to remain limited The combination of 8.6% house price growth and a slightly higher 9% Prime Rate should continue to keep the market by-and- large healthy in terms of containing levels of speculative activity. Our alternative measure of Real Prime Rate, using house prices with which to adjust prime rate instead of using CPI, remains slightly in positive territory to the tune of 0.4% in March. While only slightly positive, this situation remains highly favourable compared with the 2004/5 period where a strongly negative real rate promoted speculative behavior on a large scale.

6. End