No dramatic house price growth predicted

Absa has predicted relatively low nominal house price growth for the next year.

"Relatively low nominal house price growth is forecast for the next 12 months, and with headline consumer price inflation projected to average around 5.5 percent in 2013, some real house price deflation may still occur for most of next year," it said on Monday.

The banking and financial services group said year-on-year growth in the average value of homes in the middle segment of the South African housing market increased in November 2012, but that month-on-month price growth continued its downward trend.

This was expected to affect year-on-year price growth in the near future.

Middle-segment home values showed a nominal rise of five percent year-on-year in November 2012, after increasing by a revised 3.3 percent year-on-year in September.

In the first 11 months of 2012, house prices were unchanged compared with the corresponding period last year, and were largely affected by price deflation in the small segment of the market up until August.

Real price deflation was still evident in middle-segment housing up until October, but its momentum was slowing down, with the small and medium-sized categories showing some real year-on-year growth in October.

Real price calculations are based on nominal prices deflated by the headline consumer price index.

Consumer price inflation was 5.6 percent year-on-year in October, averaging 5.7 percent year-on-year in the first 10 months of the year.

The average nominal value of homes in each of the three middle-segment categories of the housing market was as follows in November 2012:

Small homes (80m2 to 140m2) R778,200; medium-sized homes (141m2 to 220m2) R1,064,800; and large homes (221m2 to 400m2) R1,575,500.

South Africa's real Gross Domestic Product slowed down from an annualised 3.4 percent in the second quarter of 2012 to 1.2 percent in the third quarter. This was because of major production losses in mining and some other sectors of the economy during the third quarter.

Economic growth for the full year was forecast at around 2.5 percent, with global economic trends and domestic developments expected to be key drivers of the country's economic performance in 2013.

Inflationary pressures coming from trends in food prices, transport costs and property running costs had caused a rise in headline consumer price inflation in recent months, Absa said.

However, interest rates remained unchanged after a 50 basis points cut in July this year, with the SA Reserve Bank expecting inflation to stay below the six percent level in 2013 and 2014.

Against the background of current trends in and prospects for the economy, inflation and household finances, domestic interest rates were forecast to remain low over the next two years.

"With house price growth slowing down on a month-on-month basis since mid-2012, year-on-year price growth is expected to be reflective of this development in the first half of 2013," the company said.

The information is based on data that includes mortgage applications approved by the company.
Bond originator ooba said that even though conditions were tough in November, it reported record performance for the month.

"The value of home loans approved through ooba in November is up 30 percent on November 2011, whilst October was up 47 percent on the prior year," the company said.

This boosted ooba's performance for November to 313 percent higher than its historical lowest month during the property market crash and ensuing financial crisis in 2009.

For the 11-month period January to November 2012, ooba's approvals were up 147 percent over the same period in 2009, and up 42 percent on 2011.

"It's gratifying to report this kind of growth given the extreme challenges the industry has experienced over the past five years," ooba CEO Saul Geffen said.

The growth was attributed to a significant increase in ooba's market share and an improvement in property market conditions and lending policies.

He said it was also because mortgage originators helped consumers secure home loan approval on competitive terms. He spoke of improved market conditions due to low interest rates, coupled with subdued property price inflation, and improved lending policies.
He expected this to persist into 2013.


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