Absa forecasts house price growth of 20%
Nominal year-on-year growth of 23,3 percent in house prices was recorded in June 2005 compared with a revised growth rate of 24,9% in May this year, according to the latest
Absa House Price Index. The average nominal year-on-year growth in house prices during January to June 2005 came to 26,9 percent.
In real terms, year-on-year growth of 20,9 percent was recorded in May compared with a revised growth rate of 22,1 percent in April, based on the headline consumer price index.
The average real year-on-year growth in house prices during January to May was 23,9 percent, which is based on a headline CPI inflation rate of three percent on average during this period.
On a month-on-month basis, nominal growth in house prices was 1,1 percent in June compared with a revised 1,3 percent in May this year. In real terms, month-on-month growth of 1,3 percent was recorded in April.
Based on current interest rates and average house prices, the monthly mortgage repayment and the qualifying gross monthly income were 15,4 percent higher in June 2005 compared with June last year (16,9 percent in May). Housing is still less affordable than a year ago, but the year-on-year growth rates of the mortgage repayment and qualifying income variables have both peaked at 26,8 percent back in December 2004 and have since been on a declining trend. This analysis indicates that the affordability of housing has not deteriorated thus far during 2005.
Interest rates are expected to remain relatively stable for the rest of 2005, taking into account the latest trends in international oil prices and the rand exchange rate. However,
if there is a sharp increase in oil prices from current levels, together with a sharp weakening in the rand, the risk of higher inflation and eventually a hike in interest rates
will increase significantly.
Against the background of nominal growth in house prices of almost 27 percent in the first six months of 2005, price growth of at least 20 percent appears to be likely for the year as a whole.
Taking into account inflation expectations for this year, the real growth in house prices will be positive for a record sixth year in succession