Expect to feel 6% richer this year

Home-owners can expect their property values to go up, on average, by about 6% in 2010. That's the expectation from Absa, which has been tracking South Africa's residential house prices since the 1960s.

Absa Home Loans senior property analyst Jacques du Toit said on Monday that the upward trend in nominal house prices has been evident since the middle of 2009 and is "expected to gather further momentum" as a result of better economic conditions, the lagged effect of lower interest rates and improving credit conditions for buyers.

"Keeping in mind that the positive effect of lower interest rates will gradually wear off towards the end of the year, nominal house price growth of around 6% is currently projected," said Du Toit.

Don't expect extra fuel to be added to the market through tax incentives when the national budget is unveiled in Parliament later this month. Du Toit said "not much can be expected" in terms of personal tax relief in the budget later this year. Government revenue has been under severe pressure because of last year's recession.

As for last year's returns: an uptick in inflation means that in real terms house prices fell last year.

A small house (80m² - 220m²) as measured by Absa was down a nominal 0.2% year on year in January, said Du Toit. This brings the average price in that category to about R670 100. A medium-size house (up to 220m²) increased in January by 0.1% - the first gain since late 2008. The average house is now priced at about R941 000. The large house (up to 400m²) increased in value by about 2.4% in January, bringing the average house in that category to just under R1.4m.

Article from: www.realestateweb.co.za