Absa reports May house price growth of 22,5%

Absa reports a nominal year-on-year growth of 22,5% in house prices being recorded in May 2005 compared with a revised growth rate of 24,6% in April this year.

This, the bank says in its June 2 released Absa House Price Index, brought the average nominal price of a house in the so-called middle segment of the market to about R678 800 in May. The average nominal year-on-year growth in house prices during January to May 2005 came to 26,6%.

In real terms, year-on-year growth of 20,5% was recorded in April compared with a revised growth rate of 23,0% in March, based on the headline consumer price index. The average real year-on-year growth in house prices during January to April was 23,9%, which is based on a headline CPI inflation rate of 3,0% on average during this period.

On a month-on-month basis, nominal growth in house prices was 0,7% in May compared with a revised 0,9% in April this year. In real terms, month-on-month growth of 0,3% was recorded in April. These trends in month-on-month growth are an indication of still lower year-on-year growth in the rest of the year.

Based on current interest rates and average house prices, the monthly mortgage repayment and the qualifying gross monthly income were 14,7% higher in May 2005 compared with May last year (18,5% in April). Housing is still less affordable than a year ago, but the 2004 trend during which housing became increasingly unaffordable, have turned around in early 2005.

However, on a month-on month basis, the affordability of housing has actually improved from April to May this year, with both the average monthly mortgage repayment and the
qualifying gross monthly income declining by 0,9% during the past month compared with April. This was mainly the result of slower growth in house prices in May, as well as slightly lower interest rates since mid-April.

A nominal growth in house prices of between 15% and 20% is still projected for 2005, compared with growth of about 32% in 2004. In real terms, house price growth is expected to remain positive in 2005, albeit lower than the 30,2% recorded last year.
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