Absa - luxury house price growth slips to 3,9% in 2005

Nominal house prices in the SA luxury house segment (houses valued at between R2,2 million and R8,2 million) increased by an average 3,9% y/y in 2005, according to Absa’s Residential Property Prospective First Quarter 2006 released this week in Johannesburg.

In 2004, the bank says, the nominal house price growth was 21,1% y/y in the luxury category. In real terms, price growth of only 0,5% y/y was recorded in 2005 (19,4% in 2004).

In the fourth quarter of last year, house prices in the luxury segment declined by 1,9% y/y to about R3,26 million on average in nominal terms. In real terms, this represents a decline of 5,4% y/y. Prices dropped by a real 0,5% y/y in the third quarter of 2005 in this market segment.

The declining trend in house price growth at the upper end of the market can be related to a strong supply of properties in this market segment during the past two years.

The bank says the affordability of housing probably played a role in demand tapering off in this segment of the property market during this period.
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