Economic crunch will hit house price growth even harder - Absa
November 7, 2008
By Roy Cokayne
Pretoria - Prospects for the house market for the rest of this year and next year were "quite dismal" because of current and expected economic conditions, Absa said yesterday.
Jacques du Toit, a senior property analyst at Absa, said that based on trends in the first 10 months of this year, nominal house price increases in the middle segment of the market were forecast to average between 3.5 percent and 4 percent for the calendar year.
This was the lowest annual price increase since 1996, at 3.6 percent. House prices in the middle segment were projected to fall just more than 7 percent in real terms this year.
"In 2009 nominal house price [increases are] expected to be even lower than in 2008, with real prices set to decline in 2009 for a second year in succession," he said. "Trends in domestic inflation, interest rates, real household disposable income, household debt and debt servicing, as well as the effect of the National Credit Act and the tightening of credit criteria by banks, have caused the housing market to cool off."
House prices, excluding the impact of inflation, fell 10.1 percent year on year in September to levels last seen in 2006, according to Absa's latest house price index, released yesterday.
Nominal house price growth slowed further last month to 1.2 percent year on year from 1.5 percent in September. This brought the average price of a house in the middle segment to R969 100 last month. Du Toit warned that nominal year-on-year house price changes were at risk of moving into negative territory in the near future.
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