Wednesday, 12 February 2014

House price growth still in single digits

Johannesburg - Nominal year-on-year growth in the average value of homes in the middle segment of the South African housing market remained in single digits in the first month of 2014 after tapering off during most of last year on the back of trends in the economy, household
finances and consumer confidence.

This is according to Jacques du Toit, property analyst at Absa Home Loans.

In real terms, that is after adjustment for the effect of consumer price inflation, house prices deflated further in two segments of the market compared with a year ago, while showing low single-digit growth in one segment.

These trends observed in house prices are according to the Absa house price indices, which are based on applications for mortgage finance received and approved by the bank in respect of middle-segment small, medium-sized and large homes.

The average nominal value of homes in January in each category was:

- Small homes (80m²-140m²): R764 000;

- Medium-sized homes (141m²-220 m²): R1 104 000;

- Large homes (221m²-400m²): R1 710 000

Consumers continue to experience financial strain, said Du Toit.

Growth in real household income and consumption expenditure remains low on the back of inflationary pressures and subdued employment growth, while the savings ratio does not show any significant improvement.

"In view of current trends in and prospects for the economy and the household sector, as well as recent trends in house price growth, continued single-digit nominal price growth is forecast for 2014," said Du Toit.

"Some real house price deflation is projected for this year, based on the combined effect of expected trends nominal price growth and inflation."