The average increase in the cost of building a new house in the middle segment of the housing market was 9,5% in 2007 (11,1% in 2006), according to Absa Housing Review for the first quarter released today.
Although factors such as the demand for building materials and skilled labour kept building cost increases well above the inflation rate, the slower growth in building costs last year, according to Absa, compared with 2006 is also an indication of the softening in the housing market during the past year, resulting in fiercer competition among contractors.
The average price of a new house amounted to about R934 100 last year, which was a nominal 13% and a real 5,6% higher than in 2006. The average price of an existing house was about R931 800 in 2007 (a nominal 14,8% and a real 7,3% higher than in the previous year). This made it only R2 300, or 0,2%, cheaper to buy an existing house than to build a new one in 2007.
In the fourth quarter of last year, the cost of building a new house increased by a nominal 6,2%, compared with the same quarter in 2006. The average price of a new house increased by a nominal 11,0% year-on-year to about R965 100 in the final quarter of 2007, which translated into a real increase of 2,4% year-on-year.
The average price of an existing house increased by a nominal 12,5% year-on-year to about R961 500 in the fourth quarter of last year, which brought the real price increase to 3,8% year-on-year. As a result, the nominal price difference between new and existing houses was about R3 600, or 0,4%, in the final quarter of 2007.