The increases in residential real estate prices continued to slow during
the course of 2006, the South African Reserve Bank said.
The year-on-year rate of increase in the prices of residential property
in the middle segment of the market, as measured by Absa, decelerated
uninterruptedly from 35.5% in September 2004 to 13.6% in August 2006,
the SARB noted in its latest quarterly economic bulletin.
The month-on-month rate of increase in house prices fell below 1% in
March 2006 and declined to only 0.8% in August - the lowest growth rate
in just over five years.
At the same time, banks' mortgage advances continued to grow apace.
The bulk of the mortgage advances granted continued to be in respect
of existing buildings, with less than 10% of the total amount granted
in the first half of 2006 flowing to the construction of new buildings,
the SARB added.
The SARB noted that the year-on-year rate of increase of property prices
in the luxury market segment declined to below 10% from the second quarter
of 2005, and continued to slow further in the first half of 2006.
The year-on-year rate of increase in residential property prices in
the affordable houses category remained at a high level in 2005, before
decelerating significantly in the second quarter of 2006.
Progressively higher monthly repayments on new mortgage bonds, due to
rising house prices and an increase in mortgage rates from June 2006,
together with the prolonged period during which growth in property prices
has exceeded growth in remuneration, may partly explain the slowdown
in growth of property prices, the SARB said.