The dull and lack-lustre housing market is likely to remain that way for the coming year with price increases forecast to be between 1% and 1,5% year-on-year according to Absa’s latest House Price Index.
Senior property analyst, Jacques du Toit says that marginal price growth was evident in two of the three categories measured by these indices.
In the category of small houses (80sqm to 140sqm) the growth was 2% in March, down from February’s 4,1%. The average price of a small house is now R794 200. In real terms the price growth was just 0,4% year-on-year.
In the medium-sized category (141sqm to 220sqm) price growth year-on-year was negligible at just 0,1%, bringing the average price to R966 300. Worryingly though, a real price decline of 3,5% year-on-year was registered for this segment of the market.
In the category for large houses, the picture was even more bleak as this sector again recorded a real price decline, this time of 0,2% year-on-year. Nominal price growth was unchanged at 3,5% meaning that the average price of a large house was now R1,5-million.
“Inflationary pressures are mounting in the domestic economy as international oil prices climb and local food prices rise,” says Du Toit.
He says that he does not expect any further interest rate cuts for the rest of this year and warned that the first interest rate hike will probably take place early in 2012 as inflation levels continue to rise.
“We expect that the prime lending rates and variable mortgage rates will probably rise by 250 basis points from 9% to 11,5% during 2012,” he says.
“In view of these expectations, along with the recent house price trends, nominal price growth of between 1% and 1,5% is forecast for the rest of the year. What this means is that once inflation is taken into account house prices will actually decline by 3% in real terms in 2011,” says Du Toit.