select
|

Value of small properties goes down

The ABSA house price index has shown a minimal decline in the value of small and medium houses and has revealed the property market could slow down even further.

The bank's index for the first two months of the year said the general outlook for house prices in the South African residential sector had declined with the small- and medium-sized categories recording real price deflation.

It said, based on the outlook for nominal price growth and the headline consumer price inflation rate, real house price growth would slow down to about 5 percent this year.

Absa Home Loans property analyst Jacque du Toit attributed the decline to financial pressure on households, rising inflation, higher interest rates and low employment levels.

"Real price deflation accelerated in the small- and medium-sized categories up to January, with real price growth slowing down in the large segment," Du Toit said.

"The latest trends in real house price growth came against the background of rising headline consumer price inflation, which increased from 4.8 percent year on year in November to 5.2 percent year on year in December and 6.2 percent year on year in January."

In January, credit rating agency Fitch Ratings said it did not expect real house price growth this year. Du Toit said nominal year-on-year growth in the average value of middle segment homes remained steady around the 6 percent level in the first two months of 2016, but warned the growth would slow down to 5 percent in the remainder of this year.

He said the residential property market would continue to be driven by macro-economic trends and developments on household finances, which would experience increased financial strain this year.

Du Toit said real economic growth was forecast to slow down to only 0.9 percent this year from 1.3 percent last year, whereas the headline consumer price inflation rate was expected to average 6.4 percent, up from 4.6 percent last year.

"In view of mounting inflationary pressures, interest rates are forecast to increase by a further 75 basis points in the rest of the year, after being hiked by 50 basis points in January. This will bring the prime lending and variable mortgage interest rates, currently at 10.25 percent, to a level of 11 percent by the end of the year," he said.

He said further interest rate hikes would harm the affordability of mortgage finance and dampen levels of activity and the performance of the housing market as well as the mortgage market. Property economist Erwin Rode said house price inflation could slow down to about 3 percent for the year as consumers continued to battle with high rates against high debt levels.

"All of these factors show that house price inflation will slow down. The question is by how much," he said.

FNB household and property sector strategist John Loos said the country's economic performance in the medium term would determine whether the real price deflation would turn into nominal deflation.

"Much depends on the economy. It depends on whether we are going to have a recession. Our view is that we are not going to have a recession. We will have a low positive economic growth. And if that is the case, we will avoid house price deflation. So I think we will have a single-digit house price inflation," Loos said.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 24 Nov 2017
      Demand for secure estate living in Hout Bay has risen sharply in recent years, precipitating a spike in development with estate homes now accounting for 20.24% of the property landscape with the launch of an exclusive new gated development on 26 November adding 20 more units to the existing 1250 estate homes.
    • 24 Nov 2017
      There are some things that money can’t buy – spectacular views from Mouille Point to the V&A Waterfront and a trendy and lively neighbourhood that encapsulates the very best of the Cape Town lifestyle.
    • 24 Nov 2017
      Tshwane’s four-bedroom Mayoral mansion, nestled among ambassadorial residences in the upmarket suburb of Muckleneuk, fetched R5.1 million after spirited bidding at High Street Auctions’ final sale of the year.
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK