2015 Jun 10 - Slowdown in House Price Growth Concerning
slowdown in housing prices as reflected in the latest ABSA House Price
Index report is concerning not only for the property sector but for our
entire economic outlook," said Colin Fibiger, CEO of Propertyt Network.
According to the report, released on 8 June, year-on-year
growth in the average nominal value of homes in the various categories of
middle-segment housing in the South African residential property market slowed
down further across all categories of housing in May 2015. Taking account of
the effect of inflation, some real house price deflation was evident in each
category of housing in April compared with a year ago.
ongoing declining trend in month-on-month house price growth of the past number
of months also contributes to the slowdown in year-on-year price growth. Some
marginal nominal month-on-month price deflation has already occurred in some
segments of the market over the past few months. In real terms, house prices
were on average still down by more than 11% in April this year compared with
the peak in August 2007.
average nominal value of homes in each of the middle-segment categories was as
follows in May 2015:
property sector has developed over the last two decades into a major
contributor to the GDP of South Africa," says Fibiger, "as well as
being a key economic driver which creates new economic opportunities. A
slowdown in property growth is going to cause an overall stagnation in
our economy further hampering any plans for growth beyond 2%."
- Small homes (80mē-140mē): R832 000
- Medium-sized homes (141mē-220 mē): R1 190 000
- Large homes (221mē-400mē): R1 864 000
He raises further concerns that coupled with aggresive infaltion
factors and the pressure on interest rates, we could well see the
property sector become stagnant until late 2016.
current downward trend in house price growth, which started in October last
year, came on the back of trends in economic growth, inflation, interest rates,
consumer credit-risk profiles and levels of confidence, as well as the
prospects for these and other macroeconomic and household sector-related
factors in the rest of the year. In view of these developments and
expectations, nominal house price growth is forecast to average around 6% in
2015, down from 9,4% in 2014 and 10% in 2013.
Based on trends in and the outlook for the
factors driving headline consumer price inflation, which is already showing
some upward pressure as a result, domestic interest rates are forecast to be
hiked before the end of the year and through 2016 to curb inflation. Against
the background of the inflation rate expected to rise to a level of above the
upper limit of the inflation target range of 3%-6% towards year-end and in the
first half of 2016, real house price growth is forecast to be under severe
downward pressure in the coming twelve months, with a strong probability of
prices deflating in real terms during this period.
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