Down and house

Tue, 08 Jul 2008

Nominal year-on-year (y/y) house price growth declined to 3.8 percent in June this year, from a revised 4.7 percent in May, according to the latest Absa House Price Index released on Monday.

The June growth rate was the lowest since September 1999, when it was 3.3 percent.

This brought the average price of a middle-segment house to about R965 500 by mid-2008, Absa said.

Inflationary pressures were expected to cause the Reserve Bank's Monetary Policy Committee to hike interest rates once more in August, by 50 basis points, Absa said.

"Such a step is expected to result in commercial banks raising their lending rates to the public, i.e. prime and variable mortgage interest rates, to a level of 16 percent."

Activity in the residential property market, as well as both nominal and real house price growth were forecast to taper off further from current levels towards the end of 2008 and into 2009, Absa added.

Nominal house price growth of around five percent was forecast for the full year, declining to about four percent next year.

In real terms, house prices were in line for a drop of some six percent on average in 2008, with a further real price decline of 3.3 percent projected for next year.