Real Estate News - House prices slow
HOUSE prices recorded their lowest nominal month-on-month growth in six years in October and may fall next year for the first time since 2000, mortgage lender Absa said yesterday.
Year-on-year nominal growth was also at its lowest in three years in October at 15.8%. Property prices have soared by over 200% since 1997, fuelled by the lowest interest rates in over two decades.
Analysts say high prices have slowed the boom and the prospect of an interest rate hike in 2006 could see a further easing in prices.
Reserve Bank Governor Tito Mboweni warned last month that monetary policy might have to be tightened to ensure the bank does not "fall behind" the inflation curve as it did a few years ago.
Absa said house prices rose by a nominal 0.5% in October compared to a revised 0.7% September the lowest month-on-month growth since September 1999. In real terms, month-on-month growth was 0.3%.
Absa said annual growth in house prices would likely fall to between 5 and 10% in 2006 if the central bank carries through on threats to raise interest rates to tame inflation.
The targeted CPIX inflation measure, tracked by the central bank for monetary policy, rose by an annual rate of 4.7% in September compared to 4.8% in August.
"The current declining trend in house price growth is expected to continue in 2006, largely driven by higher interest rates during the course of the next twelve months," Absa economist Jacques du Toit said in a statement.
"This implies that nominal house prices may decline on a month-on-month basis at some stage in 2006."
Article from: www.businessday.co.za