Growth in the average nominal value of homes in the middle-segment continued to decline in July, says Absa’s property analyst Jacques du Toit.
The price of a small home in this category (80 m² to 140 m²) was R844 000 in July, R1 210 000 for medium-sized homes (141 m² to 220 m²) and R1 877 000 for large homes (221 m² to 400 m²).
“Average month-on-month price growth has slowed down to below 0,2% in July, contributing to declining annual price growth. Real price growth, after being adjustment for the effect of inflation, also tapered off in June on the back of steadily rising consumer price inflation, with some real year-on-year price deflation evident in some categories of middle-segment housing,” says Du Toit.
The average level of house prices was in June down by 11,2% in real terms compared with the peak in August 2007.
He says the slowdown in year-on-year house price growth commenced in October last year and is believed to be the result of continued challenging economic conditions such as low economic and employment growth, while inflation and interest rates are on a rising trend, which impact household finances, consumer credit-risk profiles and consumer confidence.
“The forecast is for nominal house price growth to remain in single digits at a level of about 6% in 2015 and 2016, which will be lower than the average price growth of around 9,5% in 2013 and 2014.
“Based on current trends in and forecasts for nominal house price growth and headline consumer price inflation, which is projected to average 5% this year and 6,3% next year, house prices are under downward pressure in real terms in the rest of the year and in 2016,” he says.