South Africa’s year-on-year nominal and real house price growth, according to Absa Housing Review for the first quarter, tapered off in all segments of the market towards the end of 2007.
This, the bank says in its comprehensive review issued today, is mainly a reflection of deteriorating market conditions as a result of an upward trend in interest rates since June 2006, as well as the full implementation of the National Credit Act in mid-2007. The new act obliged financial institutions to apply stricter requirements for the granting of credit to consumers.
In the affordable housing market in 2007, the average price of houses in this category (houses of 40m2-79m2 and priced at R370 000 or less) increased by 19% year-on-year in nominal terms compared with growth of 14,9% year-on-year in 2006. In real terms, this represents an increase of 11,2% y/y, compared with price growth of 9,7% in 2006.
In the final quarter of 2007, nominal house prices in the affordable category increased by 18,9% year-on-year to about R274 000 on average, with growth of 20,8% year-on-year recorded in the preceding quarter. In real terms, house price growth in this category came to 9,8% year-on-year in the fourth quarter of last year, compared with year-on-year growth of 12,9% in the third quarter.
In the middle-segment housing the average price of houses in this market segment of the residential property market (houses of 80m²-400m² and priced at up to R2,7 million) increased by 14,5% year-on-year in 2007 (15,2% in 2006) in nominal terms.
In real terms (after adjustment for inflation), house prices increased by seven percent last year, compared with a growth rate of 10,1% recorded in 2006.
In the fourth quarter of 2007, nominal house prices in the middle-market segment increased by an average of 12,4% year-on-year to about R960 000. This was the lowest nominal growth since the fourth quarter of 1999, when a growth rate of 6,7% was recorded. In real terms, house price growth came to 3,8% year-on-year in the final quarter of last year. In both nominal and real terms, the year-on-year growth in house prices was down on that of the third quarter, when it was a nominal 14,8% and a real 7,4%. In the three middle-segment categories, house price growth was as follows in 2007:
• Small houses (80m²-140m²): a nominal 11,4% and a real 4,1% higher.
• Medium houses (141m²-220m²): a nominal 17,6% and a real 9,9% higher.
• Large houses (221m²-400m²): a nominal 17,5% and a real 9,8% higher.
Nominal house prices in the luxury housing segment (houses valued at between R2,7 million and R9,9 million) increased by an average of 8,1% year-on-year in 2007. In 2006, nominal house price growth was 10,9% year-on-year in the luxury category. In real terms, price growth of only 1% year-on-year was recorded in 2007 (6% in 2006).
In the fourth quarter of last year, house prices in the luxury segment increased by 7,7% year-on-year to about R4,2 million on average in nominal terms (8,4% year-on-year in the third quarter). In real terms, prices dropped by 0,6% year-on-year in the fourth quarter compared with an increase of 1,3% year-on-year in the third quarter.
This, Absa notes, has been the first real price decline recorded in the luxury segment since the fourth quarter of 2002 when a drop of 0,7% year-on-year was registered, and can be ascribed to deteriorating market conditions.