Local property market outlook bleak
Price growth is at its slowest pace in 15 years and risks moving into negative territory, warns Absa Property Reporter
THE outlook for SAs housing market in the near future is dismal, with statistics released yesterday showing that house prices last month rose at the slowest pace in more than 15 years.
Behind this gloomy situation are higher interest rates and record inflation that crimped consumer spending, said Absa , the countrys biggest mortgage lender.
Nominal house prices advanced at an annual rate of 1, 2% last month, the slowest since January 1993, after gaining a revised 1 ,7% in September, Absa said.
That brought the average price of a house to R969100.
With regard to small houses, nominal house price growth slowed down to 2,8% last month from 3,4% year on year in September. The average nominal price of a small house came to about R687100 last month.
In real terms the average price of small houses fell 8,6% year on year in September.
The nominal price growth of large houses increased 1,5% year on year last month, slightly lower that the revised 1,8% in September. The average price in this category was R1, 394m.
Jacques du Toit, senior property analysts at Absa Home Loans, said the residential property market looked bleak for the rest of the year and into next year.
He said based on the trends of the first 10 months of the year , nominal house price growth in the middle segment of the market was forecast to average between 3,5% and 4% for the full year.
This would be the lowest annual price growth recorded since 1996 when it was 3,6%.
Du Toit forecast that middle-segment house prices in real terms would drop by a little more than 7% this year from last year.
Next year, nominal house price growth is expected to be even lower than this year and real prices were set to decline next year for a second successive year.
In view of current and expected economic conditions, the outlook for the housing market towards the end of 2008 and into 2009 is bleak.
Nominal year-on-year house-price growth is at risk of moving into negative territory in the near future, the mortgage lender said.
The Reserve Bank has raised its benchmark interest rate six times to 12% since June last year, crimping consumer spending and demand for loans.
Adjusted for inflation, prices fell for the ninth consecutive month, dropping an annual 10, 1% in September, Absa said. Standard Bank, the second-biggest mortgage lender in SA, said early this week that house prices fell an annual 2, 5% last month, based on the median house price of mortgage applications it receives. Absa calculates house price inflation using the average value of home loan applications that it grants.
Article by: Loyiso Sibali - www.businessday.co.za