South African average house prices were flat for the third straight month in February after moderating to 6.5% y/y in November from 10.2% y/y in October, the Standard Bank property gauge showed on Monday.

An average house price cost 570,000 rand last month.

The five-month moving average growth rate slowed to 3.25% y/y in February, the lowest since eight years, mirroring waning consumer demand amid a higher interest rate environment.

Prices have been range-bound between 550,000 rand and 599,000 rand since December 2006, if the National Credit Act-inflated growth of 620,000 rand recorded in June is excluded, said Sizwe Nxedlana, an economist at Standard Bank.

House price have been pulling back from their peak of 35.5% y/y growth in October 2004 as higher interest rates and tougher credit granting laws eat into buyers’ pockets.

"This softening trend characterises the waning consumer fundamentals, especially more expensive debt, alongside slower real income growth," said Nxedlana.

He expected the market to remain weak in the short term but increased public sector fixed investment, recapped in the 2008 Budget, would shore up the economy, which would have positive outcomes for consumer spending and for residential property.

Article from: www.sundaytimes.co.za