House prices are set to rise again in the near future, Absa said on Wednesday.

In its latest house price index, it found that nominal year-on-year price deflation in the housing market had slowed down further in September 2009.

"If the latest trends are to continue, house prices may start to rise on an annual basis before the end of the year," Absa's senior property analyst Jacques du Toit said.

On a month-on-month basis, prices continued to rise in September after reaching a lower turning point in April this year.

Middle-segment down by 0.3 percent

Absa said that middle-segment house prices were down by a nominal 0.3 percent year-on-year to R966 300 in September 2009 from a revised -1.1 percent year-on-year in August.

On a monthly basis, house prices increased by a nominal 0.8 percent in September, from a revised increase of 0.9 percent in August.

Absa said that by September, the average house price was 3.4 percent up on the low reached in April 2009.

In real terms, house prices in the middle segment were down by 7.1 percent year-on-year in August (versus -8.2 percent year-on-year in July).

Prices of small houses (80m² - 140m²) were a nominal 4.2 percent year-on-year lower in September (versus -4.4 year-on-year in August after revision).

Price of average small house now R651 400

"This brought the average nominal price of houses in this segment to about R651 400 in September," Du Toit said. In real terms, the average price of houses in this segment of the market was 10.2 percent year-on-year lower in August, after declining by 10.6 percent year-on-year in July.

"This brought the average nominal price of houses in this segment to about R651 400 in September."

Du Toit said that in real terms the average price of houses in this segment of the market was 10.2 percent year-on-year lower in August, after declining by 10.6 percent year-on-year in July.

With regard to medium-sized houses (141m² - 220m²), the average nominal price declined by 5.2 percent year-on-year in September (versus -4.7 percent year-on-year in August after revision), which brought prices in this category of housing to an average of R901 700.

According to Absa, this translated into a real price decline of 10.4 percent year-on-year in August (versus -10.2 percent year-on-year in July).

Large house price up by 2.7 percent

Absa said the average nominal price of large houses (221m² - 400m²) was up by 2.7 percent year-on-year in September (up 1.9 percent year-on-year in August after revision).

"This brought the average nominal price to R1.416-million in September, which was R53 500 higher after bottoming at a level of R1.362-million in February this year," Du Toit said.

House prices have turned the corner

In real terms, the average price of large houses was down by 4.2 percent year-on-year in August, compared with a decline of 5.3 percent year-on-year recorded in July.

Du Toit said the residential property market was still experiencing tough times on the back of an economy that was in recession, "which adversely impacts the household sector over a wide front".

There were, however, indications that the worst might be over for the local economy and that a recovery was to commence towards the end of the year, Du Toit said.

"House price trends appear to have turned the corner and with mortgage interest rates down by 500 basis points compared with late last year, as well as the recently selective relaxation of mortgage lending criteria by banks, property market conditions in general are expected to improve, but the process of recovery will most probably be slow and gradual," he said.

In view of nominal year-on-year house price deflation slowing down over the past few months, prices might start rising on an annual basis again in the near future if current trends were to continue.

Based on these trends as well as nominal price deflation of 2.1 percent on average in the first nine months of 2009 compared with the same period in 2008, prices may record a decline of less than two percent for the full year, Du Toit said.

In real terms, house prices were forecast to decline by around nine percent this year.

In 2010, nominal price growth of between two percent and three percent was expected, with prices forecast to decline somewhat further in real terms next year based on projections for nominal house price growth and headline consumer price inflation, Absa said.

Article from: www.iafrica.com